How Has UK Contract Recruitment Changed? 2023

How the UK Contract Recruitment market changed in 2022

With the challenges relating to COVID lockdowns, furlough etc. behind us – the start of 2022 was a time full of optimism, for a continued recovery in the UK’s contract recruitment market. Whilst ultimately the market seemed to perform better than in 2021, the Cost-of-Living Crisis, Inflation, Rising Interest Rates, Recession Warnings, and war in Ukraine – all took their toll on Client sentiment.

Here, Ben, our Contract Delivery Manager shares his take:

More applicants

During 2021 there was a noticeable shortage of online applicants to the contract roles we had advertised. This trend seemed to reverse in Q1 of the year and applicant numbers have been increasing steadily ever since. By Q4 we are in a position where it is normal to receive over 100 applicants for each contract role.

More high-quality CVs

After 2020’s relative lows, rates rose dramatically in 2021 – this has effectively continued in 2022 but at a far slower pace. In 2021 it felt as if every contractor got an increase on their 2020 rate – 2022 has been a bit more hit and miss – as an average, rates have risen for our contractors in the 5% range on their 2021 rates – but for some, rates have stayed flat, or they may have even had to accept a contract at a lower rate.

Shorter contracts

We still haven’t seen a noticeable increase in the average initial contract length – ADLIB’s average initial contract is currently sitting at around 18 weeks – the majority being 3-month initial contracts. That said, 95%+ of our contracts are extended at least once – so this could be due to cautious Client sentiment and the introduction of IR35 reform in the private sector. Clients may be reluctant to sign longer contracts initially for “Outside IR35” roles – bringing the overall average down.

Remote Work

Probably the biggest change in the contract market since 2020 has been the remote working “revolution”. 2022 has seen a strong preference from our Clients towards a hybrid working model. This has been accepted by a portion of the market (2 days per week seeming to be about the tolerance limit) and rejected by another portion. A fully remote role with optional office space makes for the best candidate attraction – however, depending on your location, it is easier to get people into the office than it was in 2021.

Value for money

Because Clients are increasingly thinking about cost – we are getting more requests for Contractors with “all-rounder” sets of skills. For example – this could be a UX/UI Designer that can also carry out User Research or a Full Stack Developer with DevOps skills. Whether or not those candidates exist or are available is another matter, but Clients are definitely looking to get more “bang for their buck”.

The Perm Market has held up so far

2021 saw some pretty crazy wage spiralling which ultimately was unsustainable in 2022. However, things seem to have stabilized rather than come completely undone – and it remains to be seen whether 2023 will be a year of further wage growth or widespread redundancies. Given that many economists predict a return to economic growth in 2024 – business may decide to hold their nerve in 2023, keep their existing talent and look to make further hires.

Adapt or die

Companies that do not adapt to the new recruitment market that we are in – will inevitably fail to attract the right talent in 2023. I’m fairly certain that contract roles that are “Outside IR35”, fully remote and have a competitive rate – will continue to get the best response. If the role is “Inside IR35” expect to pay a premium of around 30% on the daily rate. If your company benefits from a Small Company Exemption with regards to IR35 – this may give you a competitive edge when hiring contractors.

Overall, 2023 is likely to bring major challenges to Clients and Contractors alike – IR35, Remote Working & UK/Global Economic Factors, are all likely to contribute. However, it’s worth bearing in mind that this is all against a backdrop of a massive skills-shortage in the UK and probably the tightest labour market in most of our memories. Perhaps contract recruitment is the perfect solution for Clients looking to complete projects, without committing to permanent hires. I’m still optimistic, so here’s to a successful 2023 for the UK’s contract recruitment industry.