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We’re all in it together

We’re all in it together

Amid all the usual and totally predictable debate over the Spending Review, it is perhaps interesting to consider things from the perspective of the freelance contractor. In the long term, any benefits that arise from the review, if it meets its aims, are much the same for everyone. In the short term, the contractor is in a different position to everyone else.

For a start, will he still be in work? That probably doesn’t depend on where he works as much as you might think. While anyone in the Public Sector is rightly feeling nervous, some of the big banks are also shedding jobs at a fair rate, so nothing is guaranteed. The freeze on big contracts by HMG will obviously limit the opportunities within HMG, but also with the prime suppliers and the smaller companies that feed them.

However, it must not be forgotten that work still needs to be done, and if you have to lose a permanent post, you may still be able to fund a short term temporary resource for the duration. So contractors will still be in demand to a greater extent than people looking for permanence.

Equally, perhaps we will see an increase in the number of smaller contracts that avoid the cap altogether. That would almost certainly push up the demand for good contractors. It would also be a good target for the government’s stated aim of giving 25% of work to SMEs, something which so far really has failed to materialize.

Of course, contractors would be a lot more attractive if the clients would only understand that they are not actually more expensive than a permie doing the same job. I’ve had the same argument at my last three clients, where I’ve demonstrated that a contractor getting 350 quid day is actually a lot better value than a permie – or a fixed term contractor – on 35 grand. And since you can send him away at no cost the minute the job is done, he’s probably quite a lot cheaper overall. That also assumes that his work doesn’t actually result in a saving that’s considerably bigger than his fees for doing the work: the old cost vs. value argument is more valid than ever before.

If we could also take out the daisy chain of intermediaries between contractor and end client, there is a lot more to be saved. In my case, the total markup between my day rate and what the ultimate end client is paying for me is around 500%. Agreed a big business will want some confidence that their supplier is capable of delivering what’s needed and covering the risks that arise, but does that assurance really have to carry that level of margin? Is it time that clients started to be made more aware of who actually does a lot of the work on the ground these days, and how much they could save by trimming the middlemen?

At the personal level the tax and allowance changes being made probably won’t affect the average contractor all that much. We have much greater flexibility over how much salary we take, if only to ensure we have funds available to keep on taking an income when the work is drying up. As a result, assuming you’re working at a reasonable level, the tax and benefits changes won’t really do much damage.

So lots of changes, lots of belt tightening for everyone. We may all be in it together, it’s just that some of us aren’t in it quite so deeply.

Alan Watts can found at LinkedIn.
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Image: A rubber boat + 2 marines by ponc?opengu?n

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