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A 2016 research report conducted by Experis positioned the UK as one of the top five countries for IT contractor use, ahead of other leading economies such as the US and China. Over three quarters (78%) of UK businesses make extensive use of IT contractors – significantly higher than the international average.
The research (a survey of executives with hiring responsibility for IT employees) demonstrates UK businesses are at the cutting edge of a wider global trend – a shift towards high-volume IT contractor hiring. In response to this, more and more contract recruitment agencies are setting up in the UK. In this post we’ll explore some of the factors driving this change in the market.
Bridging the skills gap
In order to address the growing IT skills shortage, more and more organisations are choosing to tap into the attractive IT contractor talent pool. In many instances, using IT contractors has become the go-to workforce planning solution, rather than a temporary means to cover shortfalls in permanent positions.
For tech firms, current market conditions create a real barrier to business growth. The increased demand for specialist IT staff has left many business with an inflated wage bill and increased staff turnover. Not a comfortable position to be in.
The cost of recruiting the permanent staff required to expand can put huge pressure on cashflow, leaving organisations in a weak financial position and unable to pursue possible contractor opportunities. This problem is particularly acute for SMEs. One late payment from a major client can cause a significant strain on their working capital.
Rather than making a substantial long term commitment to bringing in new permanent staff, many SMEs are supplementing their workforce with IT contractors to facilitate growth. This allows them to maintain agility while reducing the risk of a catastrophic cashflow disruption.
Flexible workflow options
For businesses with with a fluctuating workload, maintaining flexibility is vital. This is where IT contractors offer a huge advantage over permanent staff. As they are hired on a short term basis, if a project is completed early or a budget is suddenly cut, then the contractor can easily move on. This removes the need to make difficult redundancies down the line.
There are always those projects that catch businesses off guard and need to be completed ASAP. This inevitably requires a large influx of staff. Contractors are ideal when it comes to supporting time-sensitive projects. Additionally, between hires, contractors can help support an overburdened department before the right permanent employee is found to fill the role.
Hiring contractors also allows businesses to operate on a “try before you buy” model. They have the chance to see how the contractor performs in the role before engaging them for a longer contract or perhaps even offering them a permanent position.
Specialised skill sets
In the era of digital transformation, many organisations need to bring in very specific skill sets for a short period of time during the transitional period. Bringing in contractors allows permanent employees to continue focusing on the core function of the business, while contractors add value by working on new initiatives.
The best contractors have years of experience and are experts in a specific, niche area of IT. They focus on this particular area day in, day out, meaning they’re more likely to be aware of changes in the industry and cutting-edge practices. As a result they can hit the ground running. No time is wasted on training or onboarding.
Contractors have often worked in many different companies, giving them a diverse array of organisational experience. This can give contractors unique perspective, enabling them to evaluate a business from an independent perspective. Fresh ideas and innovation are often found in the diversity of voices. Having a steady stream of new IT contractors come through the door can give a business a creative edge.
Permanent IT staff are not necessarily cheaper
When a permanent employee is taken on there are lifetime costs to be considered, not simply the salary:
- Recruitment agency fee
- Gross salary
- Employees national insurance
- Office space
- Subsidies (coffee, meals, social events)
- Sick pay
- Holiday pay
- Maternity pay
- Pension contributions
- Notice period
- Possible redundancy pay
Adding up these costs, even if a contractor is paid two or three times the permanent staff salary, it might still be good value for the company. The contractor benefits by being in control of his or her own costs – at the risk price of losing a position without notice. And the company benefits by having a well defined price, no long-tail costs to consider, and being able to hire and fire at will.
Looking to the future
The traditional make-up of the ‘IT department’ is going through a period of unprecedented change. Business leaders are increasingly seeing the potential of IT to be a strategic agent of change rather than an operational cost centre. An increasing use of contractors plays a major part in this transformation as businesses demand higher levels of productivity and improved outcomes.
This shift in workforce composition has proven to be particularly effective in the UK so far. High-volume IT contractor hiring is becoming a well-established solution to the growing talent shortage. Indeed, in the Experis report, many of the countries lagging behind the UK expressed intentions to accelerate their use of contractors. 19% of respondents in the US and 17% in Australia expressed plans to hire more IT contractors in the near future.
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