Is now a good time to join the IT contractor market?

Taking a look at the state of the IT contractor industry, what might the future hold for tech self-employment?

Whether you’re looking for more flexibility in your working life, or just want to be your own boss, switching sides in favour of flexible working remains a tempting choice for many IT workers considering the ever-changing landscape of work.

But, for any of you waiting to pass go when it comes to the world of self-employment, the question remains – Is now a good time to become an IT contractor?

We’ve taken a look at some of the research provided by Hays in their Tech Contractor Day Rate Guide for 2023 and here’s some key information that newcomers to IT contracting may want to bear in mind.

Let’s talk about rate of pay

A frequently mentioned benefit of moving to self-employment is the higher earning potential. Whilst the income isn’t guaranteed, it’s no secret that there is scope to earn a higher day rate for contractors, especially those with increased flexibility and a niche skillset.

What is the average day rate for an IT contractor in the UK?

The average day rate for an IT contractor usually sits between £400-£600.

According to Hays Tech Contractor Day Rate Guide for 2023, there’s been a 3.3% increase in IT contractor day rates over the past year. Of those surveyed, 61% of clients reported increasing their contractor day rates over the last year, with a majority 85% reporting this was as a result of the rise in the cost of living.

Looks like good news. According to their research, day rates are rising the highest in the cyber and cloud industries. For anyone providing services within these industries, it’s welcome news. 

Demand for IT contractors remains high

Alright, things are seeming positive from a payment point of view, but what about demand for flexible tech workers? Whilst there has been an overall levelling off in the demand for contractors in recent months, competition between recruiters seeking IT contractors remains relatively high.

Where is this demand coming from? It’s hard to pinpoint, but it seems that we may be seeing this increase due to engagers seeking extra flexibility when it comes to their staffing costs. This could potentially be driven by the impact of inflation but is also likely to be connected to the emergence of greater general flexibility in the post-COVID landscape.

The specialist skills in demand remain unchanged, including cloud and infrastructure, data and analytics, and cyber security.

The tech industry still faces a skills shortage

Talk of skill shortages in the tech industry is by no means a new phenomenon. With 90% of engagers claiming to have faced a skills shortage so far this year only slightly down from 95% last year, it appears that the skill gap is here to stay, but why is there a shortage in the first place?

Whilst it could be pointed out that the rapidly changing nature of the tech industry may be leaving a long list of newly popular skills in its wake, engagers of tech contractors tend to think otherwise.

Thanks to the research undertaken by Hays, we know that 54% of clients chalk the skill shortage up to competition between organisations whilst an increasing number of clients, 24% up from 15% last year, are pointing to the fact that fewer people are entering the job market.

What does this mean for would-be IT contractors?

Given the government’s relentless attacks on contractors, which culminated in the wholesale reform to the IR35 rules in 2021, many observers may feel that the opportunity for a contracting career is a thing of the past. However, the private sector has got to grips with their obligations under the reform and we are continuing to see an increase in outside IR35 contracts across the board.

The requirement for specialist skills is ever-evolving and there are a number of areas – AI for example – where there is likely to be a significant increase in demand in the coming years.

Those considering a move to self-employment and contracting should therefore not be put off by regulation and legislation, all of which is entirely manageable.