How has COVID-19 impacted contractor recruitment?

From contractor demand to extra time to prepare for IR35 reform

Few sectors have been left unscathed by the ongoing pandemic. For example, the recruitment industry, which relies on companies being open for business, all but grinded to a halt virtually overnight last March, as the first UK-wide lockdown restrictions were imposed. 

Since then, it has been a story of ups and downs for recruiters, particularly those who place contractors. Having spent the best part of last year under a cloud of COVID-19 uncertainty, which saw the economy spiral into a recession, it should come as no surprise that the number of contractors out on assignment daily plummeted by 30% in 2020, when compared against 2019 data.

Despite this, the recruitment industry’s contribution to the UK economy in 2019/2020 was measured at £42.3billion, £37.8billion (89%) of which was achieved through the placement of temporary and contract workers. 

Sales and turnover aside, COVID-19 has impacted recruiters in a number of other ways – from the methods and technology used to interact with contractors and end clients, to the steps they need to take to ensure IR35 compliance in years to come.  

In this article, we look at how the crisis has affected contract recruiters…

 

Value of contractors fully realised 

The first lockdown in 2020 resulted in what experts described as some of the worst performing months on record for contractor recruitment, with a KPMG and REC study showing that contractor hiring fell at its steepest rate in 11 years. The tide did soon turn though, and COVID-19 looks to have brought the changing hiring needs of businesses into sharp focus.  

After the gradual easing of lockdown one, hiring hesitation among businesses was soon replaced by cautious optimism, as firms showed a renewed appetite for freelancers and contractors – workers who offer firms a range of specialist skills, flexibility and cost efficiencies. 

Separate research published by REC supports this, with more businesses said to be relying on contractors as a resource to help them navigate COVID-19 uncertainty. 

While the pandemic continues to hamper hiring growth, as the UK embarks on the road to recovery, experts remain confident that the demand for contractors will remain. This was a point REC Chair Neil Carberry made previously: “Businesses will use temporary work to start to build back. That makes sense, and matches the pattern of previous recoveries.”

 

Delay to IR35 reform a welcome respite 

COVID-19 led to the one year deferral of IR35 reform in the private sector. The changes, which were due to be rolled out on 6th April 2020, only to be delayed in mid-March for 12 months, gave recruiters some important breathing space. 

By postponing IR35 changes, recruitment agencies have been afforded extra time to prepare for the introduction of the off-payroll reforms. The changes mirror those introduced in the public sector in 2017 and will see fee-paying recruiters transferred the IR35 liability when placing contractors in medium and large businesses. 

With 6th April approaching, agencies are now ramping up their IR35 preparations, given the successful implementation of reform ultimately holds the key to working compliantly with contractors going forward. 

 

Remote working and remote hiring becomes the norm

Strict social distancing measures have accelerated the trend towards remote working across all industries. Working from home looks set to stay too, with one in four people predicted to operate remotely on a permanent basis going forward.

As the facilitators of jobs and contract opportunities, recruiters have been forced to adapt and adopt remote working practices themselves to ensure the uninterrupted and digital supply of contractors to end-clients at this critical time. 

From video interviews to streamlined digital hiring platforms with in-built IR35 compliance services, the rapid adoption of new technologies and remote ways of working could be a sign of things to come.  

 

Recruiters’ importance underlined by rising unemployment 

The economic crisis has seen unemployment swell to 5%, which is its highest level for five years. With 1.72million people without a job in the UK, there is a case to be made that more people will go self-employed – data also revealed that new business creation neared an all time high in September of last year. This suggests recruiters have an important role to play in connecting freelancers and contractors with end clients, who arguably need these workers more than ever. 

Looking ahead to the coming year and what everyone hopes will be the beginning of the end for COVID-19, it’s clear that recruiters who embrace new ways of working and ensure their IR35 compliance will be well placed to continue attracting contractors and fulfil the changing needs of end clients.

Qdos is supporting over 2,200 recruitment agencies and hiring businesses, helping them navigate changes to the off-payroll working rules. The Qdos Status Review facility provides a range of expert IR35 solutions, including IR35 status reviews and IR35 insurance, to allow companies to compliantly place and engage contract workers. For more information, please get in touch on info@qdoscommercialservices.com or 0116 478 3390.

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