Russam Frontline 5: New Year Optimism and the Over 50s – please come back!
Here is my fifth attempt to share a few thoughts on what is happening in the entrepreneurial world of interim management.
The next Silicon Valley?
I’ve just listened to a very optimistic and buoyant speech from our Chancellor, Jeremy Hunt, speaking from Bloomberg. Certainly, a lot of detail is needed, but I like the thought of our island being the next Silicon Valley and having the most skilled and innovative workforce in the world – the “e = employment” pillar of his plan. His speech reminded me of the one that Hugh Grant made in the film Love Actually; sometimes, it is good to remind ourselves of what we are really good at…discovering vaccines, top global universities, more Unicorn companies than the rest of Europe, and so much more.
The Chancellor speaks of the urgent need for companies to engage more staff, whether they be permanent or self-employed. Of course, the latter provides many options such as interim managers, freelancers, contractors, and independent consultants, and they currently make up 15% of those working, but perhaps it should be 20% or even 25%. Should we all be working on an interim or freelance basis by the year 2050? To be competitive both domestically and on the world stage, companies need to have the right people to deliver and get things done. They need extra resources, specialist skills, and pace. A contract can also be a great way into a longer-term role. For example, I’ve been given 24 hours by a consultancy client to find an interim enterprise architect to run a 10-day scoping project starting next week for a major bank needing to modernise its technology and routes to market. This will certainly lead to further work and the building of a team to deliver the transformation.
IR35 – it’s hurting
The Chancellor used the statistic that 6.6m people could be working but are not, for various reasons including not returning after furlough and early retirement. Out of this pool, around 1.4m would like to return to work. I think the government needs to have a real think about incentivising a return, specifically for the over 50s (yes, they have done a bit of this through job centres in the past year, but I’m not sure it has been effective). This age bracket is close to our heart at Russam, as 55% of our Interim Managers are over 50. One thing that could help here is a radical rethink of IR35. I’ve heard that 35% of contractors have closed their businesses since the IR35 reforms. The pool is smaller, and this pool of people is so important.
Poll results and what it tells us
Our interim executives are also feeling optimistic. Our January 2023 survey shows a record 61% of our Interim Managers are positive about the climate for interim assignments as we begin 2023; only 7% negative and 32% neutral. The blue colour in the chart below is very good news and a reversal of the trend we were seeing in the Autumn.
At Russam, we are seeing a nice influx of new interim assignments – doubling each week in January. HERE is a lovely interim job if your French is half decent!
We ran a poll with our interim managers last week to ask them about IR35. Not surprisingly, 65% are only looking at opportunities Outside IR35; they will not consider an Inside IR35 role. Only 14% would consider an Inside IR35 role (with a preference for Outside IR35), and the final 22% aren’t bothered either way. This matches with another major survey saying, “around 70% of contractors refuse to work Inside IR35”.
Give the self-employed a break!
With the big shift from Outside to Inside roles, (probably going from 60/40 to 40/60 since the IR35 reforms came into the private sector last year) companies are experiencing the fallout. They have a hugely reduced pool to choose skilled people and talent from. They are concerned about HMRC and the determination of status, ironically, it is okay to be “careless” – I’m not sure how that equates with taking reasonable care. They have to pay inflated rates for Inside IR35 contracts to ensure take-home pay isn’t affected – probably around a 25% increase when this doesn’t need to happen in many cases.
Our market is still so confused about IR35; it is highly restrictive at the moment and it’s hurting companies. The people we work with are entrepreneurs and innovators; they take a risk just by being set up on a self-employed basis. They will work when an organisation wants to use them, and earn nothing when they aren’t required. They miss out on many of the benefits of a permanent employee. Why shouldn’t someone in this category get a bit of a break on tax?
I will look forward to the Chancellor’s budget and very much hope for a reversal (another) on IR35; this would be a win/win/win.