How the collision of these three forces is affecting the landscape of temporary work

In the past few years, the UK has been cited as one of the most lucrative countries for contract work in the world, and the previous two decades have seen the sector steadily rise. The Self-employed were reported to have contributed £305 billion to the UK economy in 2019 and many branches of industry remain heavily reliant on both domestic and migrant temporary workers. Contractors are undoubtedly critical assets within the UK workforce, filling vital gaps when needed and providing specialised skills; though 2021 could be the year that sees an unwelcome change to the landscape thanks to three ominous forces that are set to collide. IR35, Brexit and Covid-19: three factors that couldn't have come at a worse time for contractors, as well as end-hirers, are already altering the outlook of temporary work. With all three putting both financial and regulatory pressure upon companies, difficult decisions are having to be made for businesses to simply stay afloat during this trying time. The results more often than not, mean contractors receiving the short end of the stick, and in having to adapt to drastic industry shifts, worker/hirer relationships are in jeopardy of breaking down in face of an uncertain future.

Contractors and Covid-19: a shift in supply and demand

One of the biggest issues arising from this 'perfect storm' is an imbalance in supply and demand; as almost every industry is facing some degree of financial hardship due to lockdown, there is currently an excess of contractors seeking to make up for lost income, yet a declining demand from end-hirers, having to scale down and save on costs. Covid-19's financial knock-on effect has increased job insecurity for many blue and white-collar workers, meaning that more and more are turning to contract work as either a side-income or alternative full-time pursuit. The pool of contract work is vastly reduced as it is, however, this new wave of temporary workers means more bad news for existing contractors who are not only faced with reduced opportunity but a sharp rise in competition too.

It’s a predicament further amplified by the return of UK contractors formerly working with EU based clients who are now losing out on work due to the cessation of mutual freedom of movement. The introduction of visa requirements and additional fees for UK/EU trading of services has put British contractors in a highly unfavourable position from the viewpoint of European end-hirers, who are now far more likely to go with EU contractors, free of these new implications. Many are reluctantly returning home to a climate of cut-throat competition and further saturating the supply; however, this coming April, contractors may acrimoniously find that the worst is yet to come. 

IR35 and concerns for the self-employed  

Whilst Covid-19 and Brexit are both firmly on temporary workers’ radars, a recent poll run by contractor insurance and tax advising company Qdos has revealed the April 2021 off-payroll reforms to be the biggest concern for a 62% majority of contractors. Qdos CEO Seb Maley commented that “Some contractors have been told by risk-averse clients that they will no longer engage with them as contract workers, giving them no choice but to work on the payroll or face having their contract cancelled”. This particularly invasive impact upon the worker/hirer relationship and has caused many to question the future of temporary working altogether and according to Qdos, 17% of contractors indicated that they plan to leave contingent working for the safety net of employment directly due to the fall out of the reforms. IR35 is not only altering how contractors pay taxes but is also adding fuel to the fire in the decline of contract work and its profitability; whilst many workers are having to lower their rates to compete, the off-payroll reforms threaten to revoke self-employed tax benefits entirely for some workers under company enforced blanket bans, coercing them into zero rights employment with PAYE.

Tougher times for contractors ahead

The financial implications of these three factors have profoundly impacted the world of contracting and although some are turning to temporary work out of necessity, it’s by no means an easy route for those looking to compensate for economic hardship. With contracting positions overrun with applicants, opportunity for profit is at an all-time low. However, whilst this issue of oversaturation in contractor supply is a common trend of this triple impact, for certain industries, its regulatory off-shoots are manifesting in alternative ways, causing a new set of issues to contend with.

Read part II here