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Is contracting dead or is there another way?

Is it time contractors evolved with the times?

These are certainly challenging times for contractors, with a recession, a pandemic, IR35 reform and, who could forget, Brexit to contend with. As I’m writing this, the wordsyou couldn’t make it up’ pop into my head – there are so many concurrent obstacles for the contracting industry to overcome that it’s unsurprising so many people have recently stopped working for themselves – 238,000 in the three months to August to be exact, according to the latest ONS statistics. 

IPSE suggested this massive drop in self-employment was due to a lack of support from the government, which most certainly has had a big impact. But I’m guessing it’s deeper than that. My hunch is that many freelancers, contractors and self-employed workers have thrown in the towel because it has become increasingly difficult to win work.

Has it been too easy for too long?

The truth is, many contractors have become accustomed to securing work through recruitment businesses – and not to put too fine a point on it – simply don’t have the business development (sales and marketing) skills to win work any other way. 

This is completely understandable, given that times have been good for many years – securing work in this way has been fruitful for the vast majority of contractors. 

Unfortunately, though, times have changed. But perhaps the solution isn’t to move away from contracting, but to find new and smarter ways of winning work.

A comparison between contracting and businesses

What do any other businesses do to acquire customers?

  • They develop their brand
  • They formulate a marketing strategy
  • They invest in professionally created marketing collateral
  • They have a marketing budget
  • They have sales teams that talk to prospective clients

Why is this relevant? Well, I assume most would agree that contractors are businesses – at the very least, those who are aiming to work outside of IR35 have to demonstrate that they are a true business.

So why would a contractor operate differently to any other business? Why in many cases is there no marketing activity? Surely the very essence of being a business requires some broader effort to win work?

Reaching out to a market to acquire customers has been a fundamental requirement for business success since time immemorial.

“The man who stops advertising to save money is like the man who stops the clock to save time.” – Thomas Jefferson, Third President of the USA

So what is the solution? 

Independent professionals who thrive in these unprecedented times will be the ones who change with the times and embrace new ways of winning work. Recruitment businesses will still be part of this, but other channels to market need to be explored and exploited – whether that’s LinkedIn, email marketing, networking, CRMs, websites, thought leadership, marketing automation and webinars, which can all play an important part. And the best thing is, direct clients bring work at higher margins than sharing your spoils with recruiters.

To delve into the finer points of winning direct work, why not join our 3-hour contractor winning-work workshop on the morning of Friday 27th November or a lite version on the evening of November 19th? We are billing this as ‘The Most Comprehensive Contractor ‘Winning-Work’ Workshop Ever’, which you can learn more about by clicking here.

Matt Craven is founder of The CV & Interview Advisors, experts in personal branding and winning-work in the contract market.

By Matt Craven, The CV & Interview Advisors

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10 thoughts on “Is contracting dead or is there another way?”

  1. ex-Contractor

    Contracting, i.e. day rate, bums on seat, cheaper than perm and fungible resources is certainly dead. Those days are well and truly gone. For many in the FS sector I came across, from junior BA on £400 day rate to PMs on £1600 day rate, its game over well and truly on how it was.

    In my view, ‘marketing’ and using all the CRM is of limited to no use. Unfortunately this probably even impacts even the smallest business too, because larger companies will follow their preferred partner and that’ll generally be the big boys, so unless you’re well networked, forming a partnership with a few contractors is tough if you target the large company as they’ll have supplier protocols.

    Essentially the problem is the market, i.e. client, is the one left with the risk of ‘getting it wrong’ if you’re inside or outside IR35 and therefore pays the tax penalty. So, the one-man-band ltd consultancy is no way going to pass any client’s risk test, even if you hammer linkedin, Google, Facebook, at the end of the day, it’ll be a no thank you, because they simply do not want to have back you(contractor) in any HMRC investigation at anytime in the future. The time, energy, cost and image is all stake and not worth it simply and frankly said.

    You could say, market to those smaller clients, fintechs for example, that are still small enough to be outside of IR35 requirements themselves, but they have limited budgets and won’t have the day rates to offset risk and effort compared to a perm job. So its likely if you’re skilled and sought after, you’ll bag yourself a well paid perm job.

    The key thing those service providers, e.g. accountants to insurance providers, miss is the client is asking, why should I take the risk with a one-(wo)man contractor, and for many years in the future. Seems futile trying to tell contractors to do marketing, when there’s no/limited market to buy from you.

    Its all well and good saying contractors have ‘skills’ but, many of ex-contractors know, there was a lot of 9-5 contractors that were simply rubbish and took essentially £100k+ for being so. (based on £400pd). So, those, through evolution now will drop out, and if you’ve go skills, you’ll go perm or join a consultancy, except for the very minority are I’d say are ‘artist’ in the profession and unique, will do very well.

    • Bill

      Contracting is far from dead (at least this side of next April). I, like many, was leaning towards going back to permanent but the process is so long that a contract came along and brought me back to my senses. Many of my contract colleagues, like me after a dip, are back to work.

      The rest of your reply is spot on except ‘very minority’ which could be scaled back a bit.

      After all its the clients that demand an agency based system.

    • XY

      Yes, you’re probably right Ex-contractor. I suspect many of the people touting the marketing stuff have a vested interest somewhere.

      My view is that Employer’s NI is the real issue. If we got rid of that we’d be left arguing over expenses (easily fixed). There are so many reasons to get rid of that tax that it beggars belief that it still exists today.

  2. Steve

    Contracting isn’t dead its just the freedom to work away from home due to the lack of expenses that can be claimed. Contracting will continue either remotely or locally but like me who lives in an area where there are only two companies to work for then I’m changing career.
    I currently work under an umbrella company in the Netherlands.. My pay in August (take home) was pretty good £5k but if I had to be in Holland then this would be £2.5k as my expenses for temporary accomodation and food wipes out 1/2 of my takehome salary.. That’s the biggest issue IR35 brings to the table for contractors.

  3. Ex Contractor

    Contracting IS DEAD

    The LTD’s who do have work are the lucky few, this work will dry up and then they will go the way of the rest of us.

    Permie roles man what a nightmare I joined as a perm and left after 3 weeks I couldn’t deal with the back biting politicking and sniping, bums on seat IS exactly what those perms where.

    It is a great shame contractors want to come and get the job done but now that is lost.

    Me I don’t know what the future holds but permie work is poison for me.

    3 zero vat returns filed so far … IR35 really makes the playing field fair

  4. Glennn

    It’s really quite simple. The government doesn’t want contractors. All money goes to their buddies in high price consulting firms.

    Too stupid to realize this will devestate the economy and drive us all I to other countries.

    They forget all the tax exiles in the 70s when the rate ballotoned over 80%.

    Bye bye UK, I’mal ready out now anyway, not coming g back

  5. ex-Contractor

    Interesting replies all. Thanks. For me, by contracting I mean where there’s a minimum day rate of £400 to equate to roughly £100k+ minimum income(before tax) and im basing this working in FS sector.

    As a perm if I can pick up 80k, plus holidays, bonus, pension etc it’d be near enough be the same give or take 5-8k. But the peace of mind of constant salary would also have to play a part in the calculations.

    So why would I go contracting, spend on marketing, if I can’t make the rewards, i.e. min 100k/£400pd for the risks and sacrifices I take? It only takes xmas furlough and few weeks out here or there and you’re back to comparing yourself to a permie salary. Hence why I say contracting is dead.

    I was fortunate, as ex-Big4 consultant, and consulting 15 years post graduation, office politics etc never bothered me, I got on with what I scoped with my client via agency from the get go. There was always an appendix to contracts, so I’d agree my scope, timelines and manage expectations accordingly. I looked at all my gigs as engagements as I always did when a perm consultant.

    This also meant I never took home less that £550, and that I felt was fair market price for a consultant that with the corp badge they’d be paying at least 3x more for.

    This level of contracting, where I genuinely could bring value add to the client has dissipated and those days have dried up and hence dead.

    At the time of writing, whilst contracting is not technically dead(in my context), it is for sure, dying and by 1st April 2021, it’ll be near non-existence in a form that made the risk/sacrifices worth while in the first place.

    There will always be contracting in some form, but not in the sense we’re classically used to as mentioned above. I think it’ll be more like ‘temping’ disguised as ‘contracting’. A temporary resource who pays their NI/Income Tax, does what he/she is asked and goes home.

    There will be a place for this, and this will be perfect for those that want to dip in and out of these roles to keep them ticking over as they follow other pursuits in life. Even I consider it myself, but that mortgage accounts tells me no way Mr. LOL.

    I just hope, this doesn’t go all pear shaped and with Brexit, covid, recession, that in the end, companies instead turn working practices like the US, hire/fire, temporary focused etc.

  6. Still a contractor

    Great points made by everyone in this forum. One of the positive points about contracting is that it gives a sense of independence, you don’t have to be involved in office politics, argue over appraisals etc etc. But lack of government will no doubt push contractors over the cliff.

  7. The_Mystic

    Contracting is certainly not dead. Recently signed a new contract via a traditional Agent. Agents are my sales force and vital in my supply chain. Also did a short-term contract shortly after lock-down and had to sign the contract directly with the End-Client rather than via an Agency. I had to do my own Credit Control which served to emphasise the value of the Agent taking on board the Credit Risk.

    The article does not address the Credit Control risk incurred by the Contractor when engaging directly with a Client. Particularly if the outstanding sum exceeds £10000 and therefore exceeds the Small Claims Court threshold.

    All this noise about Umbrella Companies in a recent article by Osborne Clark (Accountants) illustrates what a mess the IR35 legislation already is, and it will only get messier as they try to actually implement the IR35 legislation in April 2021. The Osborne Clark article suggests that the End-Client will be liable for tax deductions even if an Umbrella Company is used.

    Clients are beginning to realise that a Fixed Term Contract (FTC) is inferior to a Contractor Contract. Automatically the Client loses the ability to request Professional Indemnity Insurance (typically £1m) from the Contractor if engaged on a FTC. The notice periods tend to be lengthier under a FTC.

    More importantly, the Client does not get to sign a timesheet under FTC, and this can reduce their control over a Contractor.

    As time goes by more Contractors will restart their careers and will hopefully be back in business, adding excellent VFM for Clients, providing income for the much appreciated Agents.

    IR35 is dead not Contractors. There will be a rethink on IR35, a recognition that trite phrases such a ‘Disguised Employees’ are ficticious nonsense. Contractors are Contractors and not ‘Disguised Employees’.

    Some modest changes in Dividend Payments within Personal Services Companies (PSC’s) will solve most of the Tax issues that are causing the Treasury so much anxiety. For example a PSC can only declare a dividend to the Director once the payroll exceeds £30K. This will avoid the non-payment (or minimisation) of Employment Taxes, Employee’s National Insurance, and Employer’s National Insurance.

    Or, simply raise the Corporation Tax (19%) rate for PSC’s that have paid under a certain amount of NI to say 25%, therefore discouraging the minimisation of NI.

    These types of minor adjustments will render IR35 dead and not the Contractor.

  8. Nikos

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