IT umbrella company contractors could be set to benefit from HP’s decision to share more contracting opportunities with smaller UK businesses.

Hewlett Packard, the largest government IT contractor, has said it will increase significantly the number of small sub-contracting firms it uses by the end of next year. This could lead to an increase in demand for individual contractors, as more opportunities become available in the coming months.

HP intends to increase the number of SME subcontractors it works with to 15% within the next two years. The company already works with 600 small businesses and it intends to add a further 150 firms to that list. This will create job opportunities for IT contractors and freelancers who want to work within small groups.

Nick Wilson, the managing director of HP UK, said that a lot of the company’s current spending will be redirected as it moves towards providing significant support to the small and medium sized sector in Britain.

This move by HP could be of huge importance to the IT industry. Small businesses will have more opportunities and even those who do not obtain a lucrative contract from HP may still benefit as firms reassess their workload and clientele. Furthermore, the increase in opportunities in the small business sector will undoubtedly lead to more contracting positions that IT freelancers can take advantage of.

HP’s news is one of the first positive signs that things could be about to improve for the UK’s IT contracting community. We are starting to see green shoots at last!

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In case any umbrella company contractors have forgotten to file their income tax self-assessment form for the year ending April 2011, the deadline is tomorrow, January 31^st!

HMRC expects as many as 600,000 people will leave things until the last minute and submit their return on deadline day. Around 90,000 taxpayers will realise they have a query tomorrow and attempt to phone the Revenue’s contact centre for advice.

However, this year a large proportion of call centre staff are expected to take part in strike action initiated by the Public and Commercial Services Union. HMRC has now said that if the strike is not averted, it will expunge any fines imposed on people who cite the strike as a reason for filing their return late.

A spokesperson for the Revenue confirmed that the department was hoping to resolve the situation in advance, but said there was a good chance that would not happen. HMRC would therefore be unable to provide the service it would like tomorrow.

He said HMRC acknowledged that if people were trying to follow the rules, but can’t get the support they need, they would not be asked to pay an income tax penalty. Under current provisions their case would class as ‘reasonable excuse’.

Last year there was a rash of reasonable excuse tribunal cases and in some cases taxpayers had multiple late filing penalties quashed. In one case, Dental IT won an appeal after receiving misleading advice from HMRC’s VAT helpline. However, this is the first time the Revenue has said the inability to contact the helpline would be classed as a valid excuse.

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Umbrella company contractors are more likely to find opportunities with small businesses, according to the results of a recent survey.

The European Commission published the results of its survey on the 16^th January this year and they make interesting reading. Not only do SMEs provide better quality jobs prospects than their larger counterparts, they provide employment for more than 67% of the UK’s workforce and are responsible for 85% of new jobs.

SMEs are an essential cog in the economic recovery and they go some way towards negating the affect the recession had on employment. The report goes on to say that in order to draw an effective policy after the crisis, there needs to be expert analysis of how new small business job creation was affected by the recession, as well as analysing the quality of current jobs.

Limited company contractors could find lucrative opportunities in the SME market. They could find better quality jobs with a higher rank than would be available in larger organisations. Small businesses could also reap the benefits of turning to highly skilled contractors who are available to slot into a role at a moment’s notice.

Conditions do look favourable for contractors this year. New business opportunities are starting to appear but a lot of employers still have concerns about the UK’s economic future. They are reluctant to commit to hiring permanent members of staff until conditions improve, so instead they will need to rely on the UK’s flexible workforce.

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A lot of contractors were probably waiting with bated breath to hear the latest news from the IR35 Forum. However, they were in for a disappointment when HMRC postponed the meeting scheduled for the 18^th of January, saying there was more work to be done.

A spokesman for the Revenue said January’s meeting has been postponed for a month and will now take place on the 21^st of February. HMRC decided that more work needed to be done before we held a full meeting of the Forum.

The full Forum last met in November 2011, and at that time two areas were identified where working groups would progress particular projects.

One subset of the Forum was tasked with discussing details of all the possible IR35 scenarios and establishing where there could be differences in the interpretation of the regulations. It was also recognised that some grey areas were bound to remain. The second Forum subset would discuss the operation of new proposals.

The working groups, which include external stakeholders, have already held discussions but they still need to do more work and therefore HMRC decided it was sensible to postpone the main January Forum meeting.

The IR35 Forum was organised by the Office of Tax Simplification and comprises representatives of HMRC, industry and trade associations, including the PCG. A new system for administering IR35 is due to be introduced this April.

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Umbrella company contractors who have undertaken psychometric tests might be interested to learn the Talent Q believes some recruiters are misusing them.

The workplace assessment specialist went as far as to say that recruiters could be jeopardising their employer brand if they do not use the tests correctly.

An increasing number of organisations use the ability and personality tests to sift and select candidates. But recruiters do not necessarily explain the relevance of the tests to the applicants. Furthermore, they do not give the candidates any feedback, which is a breach of the British Psychological Society’s requirements.

Some recruiters do not have a centralised record of the data collected from psychometric tests and this results in duplication, leading frustrated candidates to think the employment agency is inefficient. Candidates are also entitled to an explanation if their application was unsuccessful, and all too often they blame the tests, even though other factors may be to blame.

Talent Q UK’s chief executive, Steve O’Dell, said job applicants are getting a bad experience from recruiters who misuse psychometric tests. This can cause irreparable damage to the recruiter’s brand and reputation.

It is good practice to provide clear information about what the assessments are designed to achieve, and help contractors plan proactively to take them. Assessments should be relevant and feedback should be provided throughout the entire application process. The company also said that a verification test should be conducted when the applicant reaches interview stage.

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Interim managers who work through an umbrella company should have noticed an increase in demand for their services towards the end of last year, mainly from the financial services and banking sectors.

The Interim Management Association commissioned an Ipsos-MORI poll and the results revealed that 562 new interim management assignments emerged in the quarter ending 30^th September last year. In the second quarter of 2011, only 431 new assignments appeared.

Umbrella company contractors will know that experienced interim managers are taken into a company on a temporary basis to manage complex tasks. They are classed as senior executives and as such can command as much as £2,000 per day.

Banks and other companies in the financial sector are still reluctant to make permanent appointments at management level and this situation is set to carry on as the Eurozone crisis continues.

Doug Baird, the MD of Interim Partners, said the reluctance in hiring on behalf of financial institutions is fuelling demand for interims that have experience of removing non-essential costs with the least impact on customers and employee morale.

Banks are also looking for help restructuring their portfolios of distressed debt. Interims are helping banks sell their books of loans and assisting them to recover as much as they can from a borrower that has defaulted.

Limited company contractors working in the manufacturing sector may also benefit from the newly launched Manufacturing Advisory Consortium.

Mark Prisk, the business minister, said that manufacturing has a big part to play in bolstering the UK economy. It is hoped that MAC will help SMEs generate an additional £1.5 billion for the economy, as well as creating up to 23,000 new jobs and safeguarding a further 50,000.

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It has been announced that fixed tribunal fees are going to be introduced in a bid to avoid unnecessary claims arising from the Agency Workers Directive. The set fees do away with uncertainty and could give employers the confidence they need to increase the size of their umbrella company contractor workforce.

AWR came into being on the first of October last year but employers did not feel the full impact of the regulations until Christmas Eve when they were required to provide temporary workers with 12 weeks service the same rights as their permanent counterparts. Employers who fail to comply with the regulations could find themselves facing a tribunal hearing.

The decision to implement fixed tribunal fees has been warmly welcomed by the British Chambers of Commerce. Adam Marshall, the director of policy at the BCC said that charging claimants to access the employment tribunal service should boost confidence amongst employers.

Currently, employers often decide to settle out of court, even if they feel a claim is unjustified, to avoid the costs associated with defending themselves at a tribunal hearing. It costs an average of £8,500 for an employer to defend his actions at a tribunal and yet the average out of court settlement is only £5,400.

AWR is in force to protect contractors and employers now have some protection against unjust claims. Hopefully employers will now have the confidence they need to increase the size of their temporary workforce and provide more opportunities for contractors.

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The UK is suffering from a decline in human capital according to data from the Office for National Statistics, and this could benefit contractors working through an umbrella company.

UK economy statistics use the term human capital to represent the value of skills and knowledge in the workforce. In the first few years of the twenty-first century, this value grew at the rate of about £425 billion each year. During the recession, this dropped to an annual growth rate of £120 billion but by 2010, human capital plunged by £130 billion. This indicates that fewer members of the UK workforce have the skillsets that companies require.

Jonathan Portes, a director at the National Institute for Economic and Social Research, said that if the government allows the unemployment rate to stay high for an unnecessarily long period of time, human capital will be damaged and this will have an adverse affect on long-term employment and growth.

Umbrella companies could see this as positive news. A lot of their clients have the knowledge and skills that many top-level firms are demanding. Contractors with skills in engineering and manufacturing could find themselves in high demand this year as companies look to the flexible workforce to plug the skill gaps that exist in their businesses.

IT contractors could also find themselves in demand as both employers and recruiters have already expressed concerns about the lack of suitably qualified candidates for system development and project management roles.

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Umbrella company contractors could find themselves getting more support from the REC this year as the Confederation recognises that 2012 is going to be extremely important for the UK’s flexible workers.

The Recruitment and Employment Confederation is expected to lay down a new four-year development plan, along with new campaigns that highlight the role of agencies and raise client awareness. Furthermore, the REC will continue its talks with the government to reduce red tape and set a regulatory landscape that will benefit contractors and agency workers.

Despite continued economic uncertainty, prospects for contractors look hopeful this year. The implementation of AWR does not appear to have had a negative effect on the recruitment industry and demand for temporary workers remains high.

Meanwhile, contractors working in the construction industry could be set to benefit from the housing minister’s plan to get Britain building.

Grant Shapps said recently that he was allocating £420 million into a building fund that could offer lucrative contracts for people in the construction industry this year. He explained that work came to a halt on many building sites during the recession and the money would enable construction work to recommence, creating much needed jobs as well as new homes.

The minister hopes the funding will create as many as 30,000 new jobs as building work recommences on the 16,000 homes that were put on the back burner a couple of years ago.

Developers will be able to apply for money from the fund in the form of a loan or an equity investment.

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Umbrella company contractors might be interested to learn what the REC thinks lies ahead of us as we enter into the New Year.

Last week, the CIPD predicted that 2012 would be a difficult year for many as the jobs market continues to deteriorate.

The chief executive of the REC, Kevin Green agrees that the jobs market will stay fragile for the first few months of the year but warns that we should not be overly pessimistic, as this will dent employer confidence.

He went on to explain that small businesses will drive job creation and they may not have been included in the CIPD’s assessment as many do not have HR departments. REC research has shown that although employers remain cautious over hiring permanent staff, many are considering increasing their headcount this year. Many recruiters are also reporting a skills mismatch and the lack of suitably qualified candidates is creating shortages that must be addressed this year.

The outlook for contractors and temporary workers looks good as businesses continue to take advantage of the flexible workforce. The latest REC Jobs Outlook discovered that at least 80% of employers intend to maintain or increase the size of their temporary workforce this year.

Green went on to say that he expects unemployment to peak at about 2.75 million and demand for staff will continue, particularly at the top end of the labour market. Furthermore, the private sector should be able to absorb public sector redundancies by the end of the year.

The current crisis in the Eurozone is denting confidence and a speedy resolution is needed to encourage business investment and bank lending. This would kick-start job creation and ensure the jobs market had a better year, he concluded.

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Technology is taking over our lives and 2012 is set to be no different. IT contractors might be interested to hear some of the technology predictions for the year ahead.

Mobile shopping is set to become big business. The Centre for Retail Research has predicted that by 2015, 25% of all online purchases will be made via mobile phone. eBay subsidiary PayPal’s mobile application was used by three times as many people in the US on Cyber Monday this year than last. One person even used their mobile to buy a £70,000 Ferrari from the Internet auction site. IT contractors with skills in mobile retail could find themselves in for a bumper year as more and more companies jump on the online trading bandwagon!

After a slow start, mobile wallets are now becoming a trusted payment method. Using your phone rather than a debit card to pay for purchases or comparing prices by scanning barcodes will soon become mainstream activities as mobile networks step up the battle for new customers.

Google Wallet opened to the American public last summer and the UK will be the first European country to see it later this year.

In third world countries, migrant workers use their mobile phone as a bank account. Currently around $12 billion is sent home by mobile phone money transfer and that is expected to reach $55 billion by 2016.

This year will also see the launch of Apple TV. Its design has been kept closely under wraps but some experts predict it will recognise both voice and hand gestures.

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PAYE umbrella company contractors may find more opportunities in the public sector in 2012 after the REC launches a new Commission.

The Flexible Work Commission will promote the benefits of utilising the UKs skilled flexible workforce to government. David Frost, the former chairman of the British Chambers of Commerce, is to chair the Commission, which will provide the government with practical proposals for re-energising the flexible labour market. A key part of the remit is to demonstrate how using skilled contractors can help government departments get the skilled people they need quickly and hence improve their productivity.

David Frost explained that the UK’s flexible workforce gives us a major competitive advantage.  The main aims of the Commission are to quantify the benefits of flexible working to both business and worker and identify ways to enhance this flexibility. As well as driving the political debate, this initiative will provide employers with practical solutions to maximise the benefits that come with a flexible workforce.

Kevin Green, the chief executive of the REC, said companies have a difficult task ahead if they want to stay ahead of the competition. Many will be looking for people with new skills. By tapping into the flexible workforce, they can respond quickly when new opportunities come around.

The Commission will analyse the latest innovations and trends and advise the government on the right way forward so the UK continues to get the best out of its dynamic, flexible labour market.

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