be a Long Hard Winter And Spring Does Not Look Much Better!
by Graham Parks
Just recently I have read a couple
of stories online about UK contractors who have had just a few weeks work in
the last eighteen months. A worrying read if, like me, you are a UK
contractor. I have been working as a freelance contractor for almost four
years and in that time have seen the job market getting worse and worse. I
myself have been fortunate; I have not had a period without work of longer
than five weeks until this summer.
finished my last major contract at the beginning of June. This suited me
fine. It seemed the ideal time to take an extended break. I had only one
proper holiday since starting contracting and last year worked a ten-month
contract with only one, very short, break. Over the next three months I had
a few weeks working for a friend of mine sorting out a very neglected
network that he had recently taken over, spent lots of time out in the sun,
read lots of books (work and leisure) and generally had a good rest. In all,
a very enjoyable summer.
At the end of August I started job hunting in earnest again. I’m still
skills lie in networking and mainly MS products. I have good NT/2000/98/95,
TCP/IP, MS Office, Anti Virus etc. skills. These skills are still pretty
near the top of the chart in what companies are requiring. I have worked
finance, government, health and extensively in telecommunications sectors. I
ought to be in a good position, but I am not getting results at present. So
what is going on?
do not think there the finger of blame can be pointed at any one thing.
There are some obvious reasons. The lack of business confidence and the very
uncertain state of the stock markets are undoubtedly linked and having a
major effect. I think that another part of the problem is that we are still
getting over the effects of Y2K. Many large companies spent huge sums of
money replacing computers and associated equipment. Common sense says that
with that huge number of PCs being replaced there would be fewer projects
around for upgrading and replacing for the next few years. That was three
years ago. Often businesses replace on a three-year cycle, so things ought
to be starting to move again. But they are not. I think this is mainly due
to the business climate but there are other factors to consider.
the last ten years business has been obsessed with cost cutting and
downsizing. In that time there has also been a major change in desktop
computers. You simply do not need to replace PCs every three years. Let me
is early 1995 and you have just bought a new PC, 75Mhz, 8Mb RAM, 512Mb hard
disk, 2x CD-ROM running DOS/Windows 3.1.
forward three years. You upgraded to Windows 95/Office 95, increased the RAM
to 24Mb or even 32Mb, doubled disk capacity and it still runs like a dog.
You really need that shiny new PII 400 you saw in the shop window. So you
buy it. 64Mb Ram, 8Gb Disk. It flies! Move forward another three years. You
have now upgraded to Windows 2000/Office 2000. You have upgraded the RAM to
a more sensible 128Mb but apart from that nothing. How does it perform?
Pretty well actually! So why upgrade it? For a business desktop PC three
years old there is really not much reason to replace it. An extra RAM chip
is a good idea, and cheap. When money is tight, why not run a PC for five
years instead of three, or even longer. I’ve seen this happening more and
more. I have regularly seen PCs over five years old in use. So, in my
opinion, longer equipment life and tight business spending controls mean
less work. But unfortunately, the doom and gloom does not end there. Even if
you are finding work, life is not at sweet as it used to be.
of pay are dropping. Eight years ago I had a permanent job in a company that
was contracting in Novell administrators, CNE qualified, and paying them £25
per hour. Now the average rate for contract NT/2000 administrators and
support is £20 per hour. Last week I saw an advert for a contractor with
strong NT/2000 and proficient in Exchange, SMS, 98/95 paying just £10 per
hour. I have seen one or two similar jobs as low as £7 per hour. This
problem is not just affecting new contracts; people are being affected when
contracts are extended as well. I had an experience where I was offered a
three-month extension with an 18% pay cut. Barclays Bank recently announced
that when current contracts expire contractors would be offered an extension
at %20 less than they are currently being paid. Barclays also announced that
they did not care if this meant all their 800 contractors leaving. See the
further huge problem for contractors is IR35. I can feel UK contractors
shudder at the very mention of this. IR35 is a tax law that came into being
to counter what was seen as tax avoidance. Companies were downsizing and in
some cases people were being made redundant on a Friday and coming back to
do the same job on the following Monday as a self employed contractor. The
government did not like this because as a contractor working for your own
limited company there are ways to pay yourself, which are more tax efficient
than if you were permanently employed. So you pay less tax. All this is
completely legal. But the government decided to deal with these “disguised
employees” as they called them. Major hypocrisy here, in my opinion, who
has ever heard of a millionaire who does not have some of their wealth in
off shore tax havens to avoid tax in their home country? Obviously paying
yourself in a tax efficient way is alright for the big boys. Rant mode off.
IR35 came into law, but it was so badly drafted that it also caught
contractors working in I.T. and engineering. In some cases people had been
running their own one-man companies for many years now got caught with this
new tax. The government did make some concessions. 5% of earnings are
allowed as business overhead and not included in this tax. This despite
findings that %16 was a more accurate figure of overheads. So as a
contractor you easily use up your 5% in various business costs. So if you
now want, for example, a training course the money has to be found in after
Professional Contractors Group took the government to court over this and
lost. There was an appeal as well, which shows that there was considerable
doubt about the first result. Unfortunately the appeal was lost as well,
although the Inland Revenue did come in for a fair amount of criticism from
could go on forever here. Tax offices seemed not to understand it. I have
talked to accountants who are confused by it despite having been on
specialist training courses. If you want to know more go to www.shout99.com
or www.pcgroup.org.uk and search
leave the final words about IR35 to one industry figure who said "If
ever there was a poorly written piece of legislation then this is it.
In short it is ridiculous, unusable and unworkable."
side effect of IR35 is that if people paying IR35 are not, as the government
say, real contractors but “disguised employees” then surely they are
liable for sick pay and paid holidays from clients. This is causing some
shouting as you can well imagine.
when you thought it could not get any worse, there are now draft changes
being made to the regulations regarding employment agencies. This is not yet
law, but if the proposed changes go through it will make it more likely that
even more contractors will get caught by IR35. This is a complex area, if
you want to know more, go to www.shout99.com
and search for “eaa” (without quotes). There is also a good article here.
is one glimmer of light however. Fast Track Visas have recently been stopped
for I.T. workers. Fast Track Visas are a way for the government to get
skilled foreign workers into the country to fill positions for which there
is a lack of suitable candidates. On the face of it this is good for
everyone and when this was introduced for I.T. workers there did seem to be
a genuine shortfall of people in this country with the skills that employers
wanted. The trouble is that as this situation changed, the rules did not. It
has taken an awful long time for the government to wake up to the fact that
they were still bringing in foreign workers while UK citizens were out of
work. There were also suspicions that some agencies were allegedly using
these visas to get in foreign workers at a cheaper rate than UK nationals.
Anyway Fast Track Visas are currently no more for I.T. workers, so hopefully
this will have a positive effect. Although no longer relevant, there is an
interesting discussion piece posted here.
course, there are the usual problems with agencies. But now money is tight,
some problems are getting worse. The number one problem, as always, is bad
matching of contractor skills and client needs. Despite some agencies
advertising themselves as I.T. specialists they appear to know next to
nothing about I.T. Too often they seem to just look at a list of key skills
and match them against a list supplied by the end client. My favourite
example of this is the agency that called me for a potential placing, but
was concerned that there was one key product skill that the client had
stipulated missing from my CV (Resume). The missing product? Winzip. Hands
up all those with Winzip listed as a key skill on your CV. Wait, stop
laughing, it gets better. Once I had told the agency that I did know the
product they then asked, how long had I been using the product, how long it
was since I last used it and did I consider myself a beginner, competent or
expert with it. Clueless!!!
it does not end there. Some agencies take an excessive percentage as a fee.
Be suspicious if they will not tell you what percentage they take. Be very
suspicious if the contract states that you are not to discuss rates with the
client. I had one like this once and the client let drop how much they were
paying for me. That was how I discovered that the agency was taking 40%. An
agent once told me that occasionally they take more than this.
recently heard of a contractor who, after two years at a company, asked for
a pay rise. The client told him that they were not prepared to pay him
another pay rise. The contractor asked them what they meant by “another
pay rise”. And then the truth came out. In the two year period, the agency
had increased the rate the client paid four times and had passed none of
this on to the contractor.
is also the problem of contracts that come to nothing, although this is
nothing new. I recently secured a three month, well paid, contract. The work
looked interesting and I was keen to start. The day before I was due to
start the contract was cancelled. The agency told me that the reason was
that the people who had put out the contract had not had funds for the
project agreed within the company and when they did finally try to secure
the funds, they were denied. To make matters worse, the day before the bad
news arrived, I had turned down a weeks work elsewhere.
there you have it. The few jobs that exist are paying increasing low rates.
Out of this lower rate you are highly likely to pay more in tax than you
used to and depending on the agency, you might well get ripped off as well.
those of you that think I am a miserable pessimistic old fart (form an
orderly queue please) let me leave you with this. Friends of my parents
living in New Zealand recently contacted them and family news was swapped.
The son of these friends works in I.T. in the UK. He has a wife and three
children and they are all happy here. Because of the job situation here they
are all moving back to New Zealand. Not a decision undertaken lightly. I
wish them well.
Any feedback or
comments welcome. Any job offers, even more welcome.