New data finds salary erosion driving people into self-employment and contract work
Inflation is driving permanent hire and salary freezes, which is influencing more people to go into self-employment to gain greater control over their earning power
“While there may be a fall noted in jobs in the UK, the uptick in the number of people in self-employment is indicative of a continued growth in demand for highly skilled professionals in particular, ” says Steve Sully, Regional Director, Finance & Accounting, at Robert Half.
In response to the news from the Office for National Statistics (ONS) that the UK employment rate was up in Q1 of this year, driven largely by self-employed workers, he says:
“We’re seeing a shift in the market with employers seemingly relying on contract resources both out of necessity as skills shortages continue,” says Sully, “and also as a result of general nervousness to commit to permanent headcount costs as the economic uncertainty continues.”
Sully indicates key factors are driving this trend, notably candidate confidence and a need for better take-home pay.
“Despite an overall growth in average pay noted by the ONS, the data does show that when adjusted for inflation, remuneration actually fell 3% for total pay year-on-year for Q1 of this year,” he says.
Adding, ” With the cost-of-living crisis continuing to impact households across the country, this drop in pay could be driving more people into self-employment and contract work which can often be more lucrative for highly skilled professionals.”
Robert Half’s recent Job Confidence Index (JCI) – produced in conjunction with the Centre for Economics and Business Research – found that job security in the UK remains in positive territory despite the economic climate. Search and progression confidence was also high, increasing quarter on quarter by the end of last year despite the initial concerns around a possible recession that we’re circling at the time.
“This demonstrates that workers across the country are confident in their ability to find work, despite the fall in vacancies,” says Sully.
Markets expect another interest rate rise in June
Debapratim De, senior economist at Deloitte, says the ONS data shows continued tightness in the labour market, but also early signs of slack as rate rises cool-down activity.
In a previously reported Freelance Informer report, it was revealed that UK recruitment consultancies are reporting that clients are making more temporary hires over permanent ones amid lingering economic uncertainty.
De sees a similar trend. “The increase in jobs in the first quarter has been largely driven by part-time employees and the self-employed, whilst full-time employment has decreased. Vacancies have continued to fall as employers hold back recruitment, due to economic uncertainty.
“Markets expect the Bank of England to follow last week’s rate rise with an additional hike in June, and [ONS] data seems to support that. The Bank would perhaps like to see further cooling in the labour market before ending its rate rise cycle.”