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Liveable Wage May Threaten Next Gen Contractors

Who'd have thought that the living wage would have such an effect on contractors? With the slowest growth in two years, the Markit/CIPS Purchasing Manager's Index holds a clue to the future. Can investment in apprenticeships be a real threat to the UK's outsourced workforce?

Few people would expend time and energy creating a limited company if they earned on or around the wage that the Chancellor has decreed livable. But those whose skill set commands more for their services need to take note of the rebranding of the 'minimum wage' and its impending deployment.

There aren't many businesses that employ specialists alone. Ships of industry need oarsmen as well as Admiralty.

The knock on effect of a wage increase across the board below decks could well affect the outsourcing budget on the Captain's table for high-end services.

We can get a clue that the economy is headed this way from the Markit Economy/CIPS latest Purchasing Manager's Index. With 50 as the dividing line between growth and contraction, the service industry scored a positive 55.6 for last month.

Growing Order Books Not Enough To Instill Confidence In The Economy

Growth continues (albeit at a slower rate), showing that businesses on a whole retain their confidence in the economy. But breaking that report down by sector highlights a shift in that growth.

On the face of it, news from the service industry looks grand for contractors. All but the hotel/catering industry ramped up their hiring in August. But the first hint that all's not as it seems comes from the comparative Markit/CIPS July 'score', which was 57.4.

We shouldn't books by their covers. And the second hint of a change in tide we can glean from CIPS' David Noble.

He acknowledges that staffing rose in August. But within that figure, so did apprenticeships. Citing the "reality of the costs of the living wage" from survey respondents, he too noted concern.

This concern reflected in overall optimism. Despite firms' positivity, their forecast for a brighter future was the lowest on record for six months. Even with growing order books, it's clear that confidence isn't as sure as it was prior to the election.

Some outsourcing is more equal than others

The good news for contractors and freelancers is that the same source, Markit, has also reported on the growing skills shortage. It's another one of those 'on first glance' reports that needs breaking down.

This time, the headline comes from KPMG/REC August placement figures for permanent and temporary staff. It reports that placement figures are down to their lowest in 2ΒΌ years. On the face of it, bad news?

Not quite. Here's a contextualised line from Markit's economic research department, lifted right from the report:

The main factor holding back placements [in August] was a lack of suitably qualified staff.

It's clear that the living wage is in the forefront of employers' minds. It's also clear that apprenticeships will offer a route for many to circumvent it. Four or five years from now, home grown inhouse specialists may well threaten the freelance market.

But for now, more people with specialist talent should look to plug the gap. Opportunities to earn much more as a limited company contractor and work in higher profile organisations are very real.

It's worth making the right impression now. That's not only to ensure you earn what you're worth, not what you're employer thinks you are. But getting in now will cement relationships for the future, should businesses feel constricted by budgets.

Inhouse will be the in-thing as companies make inroads into instilling specialist industry insight into their own, rather than outsourcing that need. The advice? Get in there now, before the livable wage threatens to close this door of opportunity indefinitely.