Hamish McCombie, Director of Banking and Financial Services recruitment, contributes to the UK Leadership Series with an overview of the current contractor hiring market.
There is often a lack of clarity when determining the differences between contract and temporary workers and this is largely because the terms are interchangeable, often used side by side or when describing a hire that is not permanent. FTC or Fixed Term Contracts are for a defined period and will pay the contractor on a pro-rata salary, whereas a temp or daily contractor will often be paid through a third party such as a consultancy or agency. A short term temporary assignment will often require less rigorous due diligence, due to the nature of the work, than a longer term contractor with more seniority.
Year-on-year, the contract Financial Services market in the first half of 2018 has seen a decrease in the number of positions filled by approximately 20%. In stark contrast, permanent hiring into Financial Services has seen an increase of 10% compared to the same period in 2017.
This is not unusual as seldom do both contracting and permanent recruitment see simultaneous strong periods - when talent is in demand, companies will look to sure up their workforce and Intellectual Property by locking in professionals on a permanent basis in an attempt to future proof their business. Perhaps the uncertainty surrounding Brexit has prompted companies to rethink the risks and benefits of a contingent vs permanent workforce, hence a weaker period of contract hiring.
Despite all the doom and gloom around the exit from the EU, the whole occurrence has resulted in companies hiring for positive change by filling more permanent roles and also attempting to convert contractors to permanent.
In the last 5 years we have seen significant regulations create the need for urgent hiring. This panic hiring in the fallout of the financial crisis (now a decade ago) was the driving force behind a strong period of contractor recruitment, as organisations took steps to establish a contingent workforce. We have reached maturity in the regulation cycle and, with the exception of FRTB (Fundamental Review of the Trading Book) that’s been pushed to 2020, we are unlikely to see the same volumes of contract hiring that followed the financial crash and subsequent regulatory tightening.
Whilst we are in a lull, it can only be a matter of time before the pendulum swings back and the demand for contractors surges once again. Key drivers such as innovation and digitalisation, virtual currencies and DLT (Distributed Ledger Technology) are all likely to foster this growth. We expect that the Financial Services will have to increase their contract headcount to accommodate for these fast moving changes.
Another sign of brighter times for contractors can be seen in big names, including PwC, vastly increasing their contingent teams - in this case by up to 20% by 2020 - to assist with project based work. A consultancy hiring project specific consultants is a good sign, surely?
The introduction of GDPR earlier this year didn’t bring about a massive surge in contractor hiring across our Financial Services business lines. Most banking institutions have been GDPR compliant for a number of years since the financial crisis as they are constantly auditing and adapting, so for them it has been more a case of just tweaking contracts rather than fundamental hiring.
The recently introduced IR35 regulations to the UK public sector could transpire to be a game changer. The government will soon be making an announcement on the timings and impact this could have on the private sector. The landscape for hiring of contract professionals as limited contractors could change dramatically and organisations may well have to hire through statement of works to adapt to the new regulation. Watch this space.
If you are considering entering the market as a contractor any time soon, it is vital that you understand the new IR35 legislation that might impact the market in the coming year. Regardless of all the uncertainty and rumours being spread about Brexit and the drop off in our Financial Services contract division compared to last year, there is still a vibrant and healthy contract market - now could be a good time to start out as a contractor.