With the road to economic recovery creating a wealth of new employment opportunities, one of the key challenges facing recruiters is how to match current demand with supply and more importantly, how to anticipate what value they should be placing on this demand in terms of contractor remuneration.
Despite a growing economy and increasingly favourable prospects for both recruiters and contractors alike, there remains a labour market imbalance, with some professions and certain types of workers enjoying the fruits of their labour more so than others.
Indeed, it has recently been reported that contractors working within the Oil and Gas, IT and Finance sectors are among the highest earners, with interim Group Finance Directors recognised as earning the most at a rate of £1,750 per day - nice money if you can get it. So how do you figure out what someone should or should not be paid?
There is a lecturer at a university in the US who addresses his first year undergraduates with this: 'If I paid you what you think you are worth and sold you for what I think you are worth, I would be a very wealthy man.' And he has a point. Think about it in footballing terms.
In 2013, Liverpool's Luiz Suarez was valued at £40m. Fast-forward twelve months and following a successful campaign where Liverpool came close to clinching the league title, thanks in part to Suarez, the club sold him to Barcelona for almost twice that amount – did he think he was worth that amount? Perhaps not, but his new employers did and that is the difference.
As recruiters, it is your job to understand market conditions and become aware of what the going rate for a certain skill set is in the here and now, whilst keeping an eye on how things may develop over the coming months.
For instance, it is commonly accepted that contractor roles in London and the south east typically pay higher than elsewhere in the country, with some estimates suggesting variations of one-third more than those performing the same role in north of England, Scotland and Wales.
Similarly, contractors who have invested in their personal development by gaining qualifications and key accreditations, will also be able to command higher earnings. This is because employers recognise them as having their finger on the pulse of what is happening in their industry and are fully up to date with the latest developments and trends.
But this isn't something new – just look at the NHS.
Indeed, for years the NHS has relied heavily on agency nurses to plug the gaps it has in certain key areas. Between 2012 and 2013 the bill for agency workers increased by 20%, with some agency nurses charging as much as £1,800 per day to fill staffing shortages. So will the rise in contractor rates for certain roles and industry sectors continue?
The likely answer is 'yes' when you factor that the number of people in the UK operating as a contractor or freelancer has increased significantly in recent years. Figures released in June by the Interim Management Association (IMA) found that demand for interim managers grew three-fold over the last 12 months. It highlighted that one of the key areas to benefit has been Sales and Marketing – a sector that saw fewer interim positions being created than most as a direct consequence if the economic downturn but one which is starting to see a resurgence in demand.
At time of writing, the number of contractors and freelancers on the whole account for 1 in 5 of all UK workers. And as confidence in the economy continues to grow and more and more workers follow the contractor route, recruiters need to be on their game.
By doing so, not only can they maximise the earning capacity of their contractors, they can also increase their own commissions which, at a time of increased competition within the recruitment industry intensifies, could mean the difference between your business becoming the agency of choice or an also-ran.
If you need any support in managing your agency's payroll, give the One Click Umbrella team a call.