We hope that all those in the Thomson Keene network are remaining physically and mentally well, as we all begin to lose count of which week of lockdown we are soon to tick off.
As everyone adapts to the lockdown market and adjusts working practices accordingly, the roadmap to a return to normal, or whatever normal will look like, remains unclear. We all hope that the coming few weeks will offer some clarity, and we can begin to glimpse what the rest of 2020 will look like out there.
Our regular market reports usually focus on the key news and trends that we are observing across the Financial Services Technology and Change sectors, but the reality is that, with little definition around the next phase of this crisis, the current headlines have remained unchanged for some weeks;
- Across the market, whether permanent or contract, hiring levels remain significantly depressed from market norms with demand from larger institutions at, or very near, zero.
- There is some demand from SME’s, particularly those with strong revenues and/or funding, reflecting their confidence around their market position, ambitions to consolidate this during the crisis, and confidence and clear visibility of the remote onboarding and working capabilities for new hires.
- To-date, large-scale layoffs, or furloughing of staff has been avoided at the larger institutions in our sector.
- There appears to be little, if any, adverse effect on productivity from remote working, across many functions.
- Most clients are expressing confidence in hiring levels returning to normal levels, but there is very little clarity on when this might be.
- Perhaps unsurprisingly, hires in and around Security, Networking, Cloud projects and Chat technologies constitute an unusually high proportion of our current book of work.
Our projections for the coming months take the form of nothing more than a series of questions at the moment, the answers to which may well result in some long-term changes to hiring trends and working practices that will remain in place long after the crisis is over;
- What will the long-term ratio of full or part-time remote-working staff for clients look like? This enforced experiment will have given some clear answers around remote-working efficiency, personal preferences and technical/logistical/personal limitations.
- What effect will this have on perceptions of the cost of staff? Desk/real estate costs will have to be reassessed, remote worker travel costs will be reduced, leisure time will be increased for those not travelling.
- What effect will this have on clients’ location strategy?
- A significant remote-working ratio of staff should in theory open up a nationwide talent-pool no longer consisting only of those within commuting distance of, invariably, London. What effect will this have on the UK market?
- What will be the flow-down effects of the macro-economic picture and the unprecedented measures taken by the Chancellor?
IR35 reforms; HMRC’s policy (and subsequent changes to this) around the responsibility for determination of IR35 statuses of Temporary Workers has been (until COVID19) probably the dominant factor in demand levels over the past 12 months.
The bulk of Q3 and Q4 2019 saw demand levels suppressed across the market as clients worked through a number of challenges prior to the intended implementation of the changes in April. Chief amongst these were;
- Conducting thorough legal analysis of the legislation and subsequent updates from HMRC to establish company policy. Ultimately this led to an almost blanket-ban across all the major institutions on the engagement of Personal Service Companies (PSC’s), whether directly, via agency or SOW/”Consultancy”.
- Communicating and implementing the transition of the PSC population, whether offering individuals a conversion to permanent employment, parting company with the individual contractor, either by termination or expiration of contract, or converting the individual to become a PAYE temp and working through policies and complexities of these engagements from a legal and deductions perspective.
- Establishing what their staffing population would look like, post-implementation and in what areas external resources would be required.
This period ultimately resulted in high take-up of offers to transition to Permanent employment (as high as 45% in some institutions) and the majority of the remaining contract workforce agreeing to move to PAYE contract engagements (chiefly achieved through an absence of alternative PSC engagements for these individuals across the market).
January 2020 saw the picture begin to clear in terms of which areas and specialisms would require external resourcing and what hiring plans would begin to look like.
The announcement by the government at the beginning of COVID19 that the implementation of the new rules was to be delayed until April 2021 threw something of spanner in the works in terms of clarity of firms positions and staffing landscape and a new period of uncertainty. However, some clear conclusions were soon to become apparent:
- For large institutions who had achieved a high take-up of permanent conversions and retained a large residual PAYE temp population, their policies remained unchanged.
- For large institutions offering or achieving a low level of permanent conversions or those with a relatively low Contractor population were happy to defer their implementation of a blanket PSC ban.
- Smaller institutions were generally also happy to defer until April 2020
When demand returns post-COVID the above could have significant impacts in some firms ability to attract, or retain, talent. Those individuals committed to contract work will naturally be attracted to those firms who offer them the ability to continue to work through their PSC. As such, we anticipate considerable fluidity in the contract market as 2020 progresses.
Recently further amendments have been tabled in Parliament for a further 2 year delay to the implementation of the legislation, but with support for this amongst MP’s being low enough to not even warrant a vote, it does seem as if April 2021 will see the changes finally being implemented across our sector and a return to fairly consistent policies.
In the other universe that was January 2020, a relatively bullish market was expressing ambition more significant than recent years, with priority business/product areas identified for investment and a sense across the market of a need for large-scale technology transformation, yielding winners and losers depending upon the success of these initiatives.
Our best guess is that this will return relatively promptly in 2-3 months time and we remain ready to support our long-standing, very broad client base, in achieving their objectives.
Please contact Info@thomsonkeene.com should you wish to discuss the above in more detail, are considering looking for a new position, or simply wish to get back in touch.
Keep well everyone and we look forward to working with you all again soon.