Contractors, will 'respect' replace 'rates' in your new normal?

Even before the major events of coronavirus lockdown and IR35 reform delay, more of the UK’s contractors started putting greater stock in ‘flexibility,’ potentially at the expense of their own bottom-lines, writes Christian Hickmott, chief executive of Integro Accounting.

This softening of the traditionally hard-nosed contractor workforce -- picked up by a survey we ran on the eve of the reform’s delay, meant we saw its members chasing headline pay less, focussing on skills more (up 4%), and opting for shorter, one to three-month contracts (up 13%).

Respect: its new meaning

Such respect for the work over the rate is only likely to continue thanks to us all enduring a national pandemic. And the word ‘respect’ has taken on a whole new meaning in 2020.

From what we can see (from our survey but what we’ve witnessed since too), not only is a hunger for autonomy playing a major part in the work-related decisions of contractors. It’s also clearly linked to the importance which contractors are increasingly attaching to wellbeing. Moreover as stated, these findings – including more contractors having respect for their own wellness, were collated just before covid-19 really took hold.

Yet even back then in early-to-mid March, many contractors said they were willing to work for reduced pay in return for ‘Greater Flexibility’ (85% rated ‘GF’ making it their top perk, up 10%; 72% rated Take-Home Pay, down 2%). These motivations surely point to the then-impending IR35 reform. But arriving at what now looks like the other side of this pandemic, with hopefully their health and the health of their loved ones intact, will only serve to sharpen contractors’ no longer ‘cash-only’ motivations.

It works both ways...

Respect is often pointed out to be a two-way street. Interestingly, while the IR35 changes may still be very much on the horizon, contractors reported feeling they are “treated with greater respect” from their clients, or as another put it, “seen and treated differently to permanent staff.” Plus, even though the now-known delay wasn’t part of them, IR35 discussions were familiar and taking place for the vast majority. Some 74% said they had been contacted by their end-client or recruiter about the off-payroll changes. Of those, about three-quarters refused to use an umbrella company or were ‘undecided’ on the next steps.

The postponement of the off-payroll reform has come as a big surprise to many. But is it needed? Absolutely. The results we’ve got show that many were still deliberating their next steps. With a deferral now in place, contractors and their clients have got time to get support to fully understand private sector IR35 reform. For contractors, that’ll likely mean looking at how to continue contracting through their own limited company. For clients, that’ll likely mean looking at talent and how to avoid losing it, and how to get it from rivals.

Covid offers fertile conditions for the importance of flexibility

Certainly, contractors won’t put up with any old treatment. In fact, our survey shows that ‘No Office Politics’ is identified by two-thirds of recipients as a perk of contracting. The ‘new normal’ we’re entering might very well be defined by others in relation to covid-19. But for contractors, it must surely factor in that many of them are willing to take a reduced rate in return for greater flexibility, shorter contracts, better wellbeing and, the cherry on the top, no office politics. The coronavirus looks like it will only strengthen these non-financial push and pull factors, given that the underlying message from contractors seems to be that they want to avoid unnecessary stress and drama.

As the economy starts to shift back into a sense of normality, it will be interesting to see what changes happen in the market. Will ‘business as usual’ for contractors mean reverting to the focus on rates and rates alone? Or is covid-19 the final push required to topple the ‘cash is king’ mentality, in favour of contractors’ revived respect for autonomy, shorter contracts and skills development? Not even us accountants would like to calculate the odds, but such flexibility must surely be the firm favourite.