Last week’s unemployment figures made depressing reading for everybody, including umbrella company contractors.

Data from the Office for National Statistics showed that 2.62 million people were unemployed in the third quarter of this year. Youth unemployment is a matter of grave concern, with the figures showing that 1.016 million young people are now without a job.

Kevin Green, the chief executive of the REC, was clearly distressed with the youth unemployment figures and said the government needs to take urgent action to rectify the situation.

He reiterated his calls for a National Insurance holiday for small businesses that hire young people. Furthermore he urged businesses and recruitment experts to raise awareness and create better avenues into work.

Government policy must revolve around jobs and growth, he continued, and George Osborne’s Autumn Statement later this month must kick-start the process. The government must start taking real action – just talking about it is no longer good enough.

Will rising unemployment be enough of a deterrent to stop workers looking for pastures new? According to a study by Train4TradeSkills, more than 25% of workers are dissatisfied with their current position and the majority of them intend to make a career change within the next five years.

Top of the dissatisfaction table comes people working in the retail sector. With only 14% saying they are very satisfied in their job. People in the leisure and hospitality sector are the most satisfied, but at only 27% the percentage is still not high.

Interestingly, 46% of the employees questioned for the survey said they wanted to be their own boss. With unemployment continuing to rise, self-employment may be the only option available to the UK’s dissatisfied workforce.

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According to latest data from the REC, the recruitment industry in the UK grew by 25% in the last 12 months and a lot of this growth can be attributed to the increase in demand for PAYE umbrella company contractors.

Turnover from permanent placements was £2.5 billion – 37% up on the previous 12 months, but turnover from temporary assignments leapt up to £22 billion from £17.4 billion.

There were more than a million temporary placements in the 12-month period, compared to 879,000 in the previous 12 months.

Kevin Green, the chief executive of the REC, said that the recruitment market is still tough, but it is vital that UK businesses recognise the importance of having a flexible, highly skilled workforce.

Employers are understandably nervous about hiring full-time permanent members of staff at a time when the European economy seems to be crumbling. But strangely enough, this doesn’t seem to be translating into more opportunities for IT contractors.

In its latest Report on Jobs, the REC said IT contractor demand fell to a low of 52.1. Although this is up on the corresponding period last year, demand for temporary IT workers has now been falling for seven consecutive months.

However, demand for permanent IT staff is on the rise and KPMG, the co-author of the Report, said this was the one positive piece of news to come out of the latest research.

REC members are still struggling to find suitably qualified candidates to fill both full-time and temporary roles in Java Development and they have also had to contend with a shortage of freelance Business Analysts.

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Research by the Association of Recruitment Consultancies suggests that the contractor workforce in the UK may be about to suffer because of the implementation of AWR.

Slightly over 50% of the survey’s respondents think that at least some of their clients will reduce the their temporary headcount in the next 12 months. Furthermore, a lot believe that clients will need to spend as much as 10% of their working day doing admin tasks now that AWR is in place.

ARC chairman, Adrian Marlowe, said unemployment is at its highest level for decades and the government should be doing everything it can to safeguard agency workers’ jobs and support the companies that hire them. The AWR are causing more harm than good.

He went on to explain that it’s important for the UK to retain a flexible workforce and therefore systems must support both businesses and agency workers. The new AWR don’t benefit either group.

However, these results are in sharp contrast to those discovered by the REC in its recent Recruitment Industry Trends Survey, which found that the recruitment industry grew by 25% in the year to March 2011.

The REC predicts that the recruitment industry will continue to grow and turnover could reach £33.5 billion by 2014.

Kevin Green, the REC’s chief executive, said the recruitment industry is demonstrating resilience, but there is still a long way to go. We’re only six months into the government’s four-year austerity plan and more public sector cuts are on the way.

However, the government now recognises that it is vital for the UK economy to have a flexible workforce and this is a great opportunity for firms to come up with creative ways to use these valuable resources.

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Contractors may be interested to learn that the UK hires more online freelancers than any other European country.

Elance, the online freelance jobs market, recently released survey findings that showed that the UK hires the greatest number of online freelancers, followed by Germany, Switzerland and the Netherlands.

Fabio Rosati, the CEO of Elance, said the UK is leading the trend for online workers. Businesses appreciate the flexibility of a freelance workforce and contractors are snapping up online working opportunities now that traditional employment routes are stagnating.

He went on to explain that this trend could be seen across Elance’s platform as companies turn to freelancers and contractors to finish projects and fill skills gaps.

Maybe not surprisingly, companies in London hire the most contractors from the Elance site. However, in recent months, there has been an 89% growth in online hiring from firms in Birmingham and 59% from companies based in Reading.

Meanwhile, the REC will be extolling the virtues of the flexible working market when it participates in the European Employment forum later this month.

Tom Hadley will chair the meeting and will focus on the role recruiters in the private sector can play in national labour markets.

Hadley said he was delighted to be invited to such a high-profile event and says it shows recognition for the role the UK recruitment industry is playing in promoting flexible labour and helping to tackle youth unemployment.

In addition to the opportunity to highlight the REC’s Youth Employment Charter, the Forum in Brussels will provide a great chance to exchange views with other European employment experts, he added.

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According to jobadswatch.co.uk, the third quarter of 2011 saw an increase in the number of opportunities for IT umbrella company contractors.

The website’s data shows a 4.7% increase in the number of adverts for freelancers on the main IT and multi-sector UK recruitment sites in Q3. The number of adverts for full-time IT staff also increased, but only by 1%. However, these figures show that IT recruitment has been expanding for the last nine consecutive quarters.

Jobsadwatch expects this upturn will continue, as employers frequently turn to contractors in the first instance when hiring conditions improve.

However, there are regional disparities and IT contractors in the North West actually saw a 13% decrease in the number of job adverts in the third quarter, whilst Inner London registered the most new contracts.

Adverts for contractors with AGILE skills were up by 38%, followed by .Net with a 23% increase. AGILE is very much the new kid in town, but is rapidly gaining in popularity. There has been a 75% increase in demand for permanent staff with this particular IT skill over the past year.

None of the IT skills registered a fall in demand, but candidates hoping to secure a public sector IT contract saw a 40% drop in adverts.

Financial services firms are now looking for more IT contractors than they were this time last year, as are software houses.

The Monster Employment Index also registered a 19% increase in IT recruitment over the past 12 months. Despite this, the IT sector dropped to fifth place in the monster overall rankings. Engineering topped the chart, transport and logistics came in second and maintenance and construction occupied the third and fourth places.

Monster’s Employment Index also showed that in September, six out of the nine regions in the UK saw an annual increase in online job vacancies. Best of all was the South West where opportunities increased by 22%.

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Employers are increasingly turning to the flexible workforce, including freelancers, to help them survive during the current turbulent economic climate.

The REC recently published a paper entitled “Talent Acquisition in Turbulent Times” which highlights a change away from the traditional model of managing talent in favour of a model based around Talent on Demand. This allows companies to align their talent requirements with their dynamic business objectives and move away from a fixed base of resources to a more flexible one.

External recruiters have a vital role to play in this new model, providing companies with unique access to a pool of candidates with rare skills.

Roger Tweedy, the director of research at the REC, said the emerging open model challenges the existing internal recruitment solutions that are becoming bogged down by the pressures of time and cost.

HR departments face some serious issues as global talent shortages get worse and companies need to alter their approach to acquiring talent. Employers face major challenges if they want to secure the best candidates and gain competitive advantage, Tweedy continued. As well as addressing rapidly changing technology and a lack of suitably qualified people within their organisation, they will also have to consider a new breed of candidate and new ways of working.

We need to identify new robust recruitment models that can withstand the challenges of the future. Leading recruitment agencies are already developing new ways to match both active and passive candidates with employers and these new tools enable recruiters to provide better value for their clients and build up vital strategic relationships.

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The Agency Workers Regulations should not prevent organisations using umbrella company contractors to build a flexible workforce, according to the REC.

The REC insists that UK companies still have a variety of options including the Swedish Derogation Model that has already been adopted by Tesco. The Confederation stressed that this is a legitimate supply model and should not be viewed as a “get out clause”.

Kevin Green, the chief executive of the REC, said that AWR has encouraged employment agencies to design innovative recruitment methods. Some have hired their temps on a permanent basis, which is obviously good news for the temporary workers who will benefit from added job security.

With the Swedish Derogation Model, the recruitment agency becomes the temps’ employer and must pay its workers when they are in-between assignments. It’s not a way round AWR, rather it’s a great way of making sure the UK still has a flexible workforce, said Green.

The main issue surrounding the Swedish Derogation Model is one of commercial viability because it exposes agencies to increased risk and obligations. In order to make it work, there needs to be strong collaboration between recruiters and their clients.

He went on to explain that in the majority of cases, new supply models are not necessary. In the majority of sectors, temporary workers’ pay is on a par with, if not higher than, their permanent counterparts. Furthermore, around 50% of all temporary assignments are for less than 12 weeks and are therefore not bound by AWR.

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Umbrella company contractors are no doubt well aware of the Agency Workers Directive that came into effect at the beginning of October.

Basically, AWR was designed to put contractors and temporary workers on an equal footing with their permanent counterparts when it comes to pay and working conditions.

Ever since AWR was announced, some companies have been looking for ways to get around it.  Tesco recently confirmed that it was going to use the Swedish derogation model to avoid paying its temps the same wages as its permanent employees.  In order to do this, Tesco will source temporary staff from recruitment agencies that directly employ their temps.

The Agency Workers Regulations do contain anti-avoidance measures, but employers are legally entitled to use the Swedish derogation model. The Sunday Telegraph recently reported that Tesco has asked a recruitment agency that supplies it with truck drivers in Kent to employ the temps directly. As a result, 400 drivers could lose £150 a week.

Tesco has defended its actions saying that a lot of agencies are using the derogation to ensure that temporary work remains flexible and competitive. The government, the Confederation of British Industry and the British Retail Consortium have all recognised this approach.

The supermarket giant added that this move is not a Tesco initiative and it is not asking agency workers to sign a new contract.

Meanwhile, the FPB has launched a new guide to help employers understand the recent changes to UK employment law.

The chief executive of the FPB, Phil Orford, explained that employment law can seem like a minefield that is continually changing. AWR is one of the biggest changes we have seen in recent times and it is vital that employers understand their responsibilities and stay on the right side of the law.

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Contractors working through an umbrella company might be interested to learn that nearly 50% of the UK’s SMEs are struggling to find the right staff.

The British Chamber of Commerce surveyed 6,000 small businesses and discovered that 45% of them felt it was either quite difficult or very difficult to find employees who were a good fit for a position.

We now have 2.57 million unemployed individuals in the UK and this figure could rise further as more people are made redundant from the public sector. Despite this, a lot of firms say candidates simply don’t possess the right skills. They complain that candidates are deficient in literacy and numeracy, whilst softer skills such as communication and timekeeping are also in short supply.

Only 45% of companies said they were very or fairly confident when it came to recruiting graduates, and that percentage dropped down to 29% when it comes to the recruitment of school-leavers with A-levels or an equivalent qualification.

The survey also showed that private sector bodies have little confidence when it comes to hiring ex-public sector workers or people who have spent at least six months without a job.

John Longworth, the BCC’s director general, said companies need capable workers in order to remain competitive and many SMEs want to expand their workforce but are struggling to find candidates with the right skills.

We have record youth unemployment and yet companies feel our education system is not equipping young people with the basic literacy and numeracy skills they need to survive in the world of work. Furthermore, employers feel that youngsters are lacking in the ‘softer’ skills, such as communication and timekeeping, which are essential to a successful work environment.

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A new report has claimed that PAYE umbrella company contractors are disadvantaged by failures in the Government Security Clearance procedures.

The study, which was conducted by the PCG and the Centre for Security and Intelligence Studies at the University of Buckingham, highlighted a security shortcoming in the recruitment process.

John Brazier, the managing director of the PCG, explained that security clearance should keep the wrong people out and let the right ones in, but this is not functioning properly. Some highly qualified contractors found themselves in a catch 22 position whereby they are unable to secure a contract without clearance or obtain clearance without a contract.

The author of the report, Professor Anthony Glees, said the research proves that the National Security system does not work. There appears to be no consistency and candidates who are more than qualified don’t get a look in, whilst people who hold pre-existing security clearance have a distinct advantage.

Although the Cabinet Office has laid down guidelines, they are routinely ignored in order to speed up the recruitment process. Brazier has called on government departments to strictly adhere to the guidelines and make sure UK taxpayers’ money is being spent on the best possible talent.

We need to be confident that the government has an effective vetting system that can handle flexible staff. The current system does not work because the guidelines are not being enforced. An independent forum should be established to monitor the way agencies, contractors and clients act when it comes to security vetting, he concluded.

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Umbrella company contractors might be interested to hear the REC’s opinion on the latest unemployment statistics.

Data from the ONS, released on Wednesday, showed an increase of 114,000 in the number of people without a job. The UK now has 2.57 million unemployed people, 991,000 of them between the ages of 16 and 24.

Tom Hadley, the Director of Policy and Professional Services at the REC, said that although these figures were worrying, there is still significant demand across a range of sectors. However, the government needs to address the disparity between the skills available and the needs of business.

With 21.3% of the UK’s young people out of work, the coalition must implement measures such as an NIC holiday for companies that hire young jobseekers. The recruitment industry is already contributing through the Youth Employment Charter, but the business community as a whole should become more involved.

The REC expects unemployment to plateau at around 2.6 million. The UK has a resilient jobs market and we do not expect unemployment to reach 3 million. Employers are always going to be looking for workers with the right drive and skill set to help their firms compete. And despite the Agency Workers Directive, there is still a high demand for contractors and temporary workers, he added.

Contractors working in the hospitality industry could be set to benefit from next year’s Olympic Games. Despite a reduction in consumer spending, the hospitality industry has continued to create jobs and Ian Burke, a director of Caterer.com, said he expects demand to increase further as we get nearer to London 2012.

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The Cranfield School of Management thinks the implementation of AWR will cause small business owners to think more carefully about using workers from umbrella companies.

The Agency Workers Directive went live on the first of October. This EU-inspired legislation is designed to put temporary workers on a par with their permanent counterparts after they’ve completed 12 weeks in the same role.

Dr Clare Kelliher, from Cranfield School of Management, said a lot will depend on the reason why businesses employ temps. Companies that use temporary workers to fill seasonal peaks in demand will more than likely continue to do so, although they may find it costs them a bit more. On the other hand, businesses that saw temps purely as a way of cutting costs will need to rethink their recruitment strategy.

ACAS recently warned employers that they could be fined up to £5,000 by an Employment Tribunal for breaching AWR.

There are currently about 1.4 million agency workers in the UK who rely on recruitment agencies to match them with employers. However, a study conducted by the REC shortly before implementation date discovered that only 10% of employers were fully prepared for the new changes.

As well as being entitled to the same pay and conditions as permanent employees after the 12 week qualifying period, they will be allowed to use collective facilities such as the canteen, crèche and transport, from day one. Agency workers are also entitled to be made aware of any job vacancies that arise in the company.

Temporary workers will not be entitled to childcare vouchers, season ticket loans or subsidised gym membership and they cannot claim unfair dismissal, maternity leave or redundancy pay from the employer.

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