Contractor body warns of two-year rate freeze

A two-year freeze in their pay rates might be on the cards for contractors, according to a 2018 year-end forecast by IPSE.

Writing in its latest confidence index report, the contractor body said that the average prediction of the three occupational groups of contractors it probes was a 3.5% increase.

But in light of a 3% rate decrease in 2017, “this means that there will have been virtually no increase in freelancers’ day rates for two years by the end of 2018,” the report says.

Even the average 3.5% prediction of the three freelance groups – broadly; ‘professionals,’ ‘managers’ and ‘associate professionals’ -- seems like it should be viewed cautiously.

IPSE says the percentage was heavily determined by a minority of associate professional contractors predicting “very large” rate hikes, whereas the two other contractor-types actually predict (small) rate reductions.

“Freelancers’ income has also fallen by three per cent since the same quarter last year, and they expect it will grow by just 3.5 per cent in 2018,” wrote the Association of Independent Professionals and the Self-Employed (IPSE).

“This may suggest that freelancer nominal income growth will have been close to zero for the two-year period 2017 and 2018 (and real income will have in fact declined).

“Input prices (the cost of doing freelance business) are expected to rise by around 10 per cent over the next year, which, taken with almost flat earnings, will mean a squeeze on freelancers’ profit margins.”

The analysis follows a few days of mainstream media reports indicating that bigger pay packets are being approved by companies, due to a tightening labour market.

Seeming to call those reports into question however, a quarterly market update by the Chartered Institute of Personnel and Development shows “subdued” wage growth of just 2%.

The reading yesterday, based on the responses of more than 2,000 hiring companies, represents a tightening on the 2.5% median base pay increase in the year to December.