46% of contractors have raised their rates in 2022, yet expect poor cash flow to be a major concern
A survey commissioned by Cool Company found that nearly half of contractors have increased their rates in 2022, while 17% have reduced their day rate. Cash flow concerns have remained a top driver for more than a quarter of respondents to raise their rates. Getting paid on time still remains an issue in 2022.
- More than a quarter of contractors anticipate challenges with poor cash flow n the next 12 months
- 46% of contractors say their client charge rate has increased in 2022 compared to 2021
- 17% of contractors say their rate has decreased in order to ensure cash flow
According to new research released by Cool Company, a contractor payroll company, nearly half of all contractors (46%) have increased their client rates in 2022, with more than a quarter (27%) expecting poor cash flow to be among the biggest challenges they face in the next 12 months.
The survey, conducted to ascertain how contractors are managing a year on from the implementation of the IR35 legislation, took in the views of 500 contractors.
The findings relayed that almost half (45%) were feeling positive about contracting as a whole, with most already having made changes to the way they work to ensure the viability of their business, including changing their client rates.
Some 37% said that their rate had not changed, while 6% said their rate had increased a lot and 15% reported that their client charge rate had decreased, leaving 2% saying that their rate had decreased a lot.
“It seems that in many cases, these changes have been driven by cash flow issues, highlighting the problem contractors still have getting paid on time, with contractors either increasing their rates to cover the deficit, or decreasing them in a bid to attract more clients,” said Cool Company.
Other areas of concern highlighted in the survey were the rising costs of materials and labour, which have impacted 22% of contractors so far. More challenges include the difficulty of finding new clients (22%) as IR35 has impacted the number of businesses willing to navigate the new legislation and work with contractors. On the whole, however, only 16% of the contractors interviewed were feeling negative about contracting.
‘The implementation of IR35 was extremely concerning for many contractors,” said Kris Simpson, Cool Company’s Head of B2C Business UK.
He continued, “But although it’s not been easy, the impact has not been as devastating as many first feared….the concern now is that if cash flow continues to be problematic, contractors are going to be faced with increasing their prices further, making their services a less viable option for the general business community.”
He added that what is certain, is that contractors will choose to work with companies offering reliable and fast payment, as chasing overdue invoices and worrying about payment are both uncertainties contractors could do without in the current climate.
“What we don’t want is contractors re-evaluating their career choice, again. With the overall contribution to the UK economy by contracting and freelancing professionals resting at around £119 billion, that could have a dramatic impact on the economy.”
Tips for Navigating IR35 in 2022
The most important issue for contractors is to be sure of their status, said Cool Company.
“If your clients do not fit into the Off-Payroll Working Rules (OPWR) criteria, you don’t need to worry. Right now, the rules don’t apply to you. But if you are working with the bigger brands, you need to ascertain whether you really are self-employed, or if your terms could reasonably be viewed as employment.” So ask yourself:
- Are you working with a range of clients, or just a single employer?
- Do you provide your own equipment, or is it provided by the business?
- Who decides when and where you work? Can you refuse work that doesn’t fit within the terms of your original contract?
- How long is your contract?
- Do you receive any employee benefits?
- Do you have the right to terminate your contract?
- Is there any degree of financial risk to your work? Does payment depend on your work being completed to a requisite standard? Or are you simply paid the same fee regardless of the work you produce?
If your answers to these questions indicate a more ingrained and permanent relationship with the business you work for, there is every chance that you may be considered an employee by HMRC.
What are the options for contract workers post-IR35?
IR35 does not stretch to cover overseas employers, but it can still impact them as FI previously reported. And for those with skills that can travel, there is literally a whole world of opportunity waiting. It’s a route that can be quite difficult to travel alone – finding contacts and opportunities can be time-consuming. But with trustworthy agencies, legitimate umbrella companies, and contract marketplaces smoothing the way, it’s an avenue well worth exploring, according to Cool Company.
