Tech salaries could rise by 20% in 2021

Tech salaries could rise by 20% in 2021 as the skills gap widens.

That’s the stark warning to employers from Simon Hayton, CEO of Bolton-based Workforce People Solutions. Hayton predicts the combination of Brexit, Covid-19 and the new IR35 legislation will result in tech salaries rising by between 10-20 per cent as businesses chase the best talent.

“It’s a simple case of supply and demand,” said Hayton. There are massive skills shortages which mean talent pools are depleted.

“Brexit is a big factor. Historically a lot of talented European candidates would come to the UK but we are closing ourselves off to a huge European talent pool that up until December 31, 2020 was able to come here with free movement.”

Workforce People Solutions was founded in 2006 and has placed 15,000 people into jobs, with around 90% of recruits coming from overseas. Hayton said: “The Brexit boat has sailed but the reality is from January 1, 2021, anyone from overseas wanting to work in UK will need a Tier 2 visa so they’ll effectively have to be sponsored.”

“Workforce has got a sponsorship licence so we can source the talent, bring them into the UK and place them into work in projects with our host clients but there’s still going to be more demand than supply and the result will be wage inflation.”

“Jobs in the tech sector have grown exponentially, even during the pandemic, so demand for the best tech talent will be even hotter in 2021.”

“Historically it can be harder to recruit outside hotspots like London and Manchester and that’s where I think the wage inflation will be at its highest.”

Workforce employs 50 people and their staff speak eight different languages. The company has just launched a new division called Workforce Digital to specifically cater for the tech sector. As well as Covid and Brexit, Hayton predicted the new IR35 legislation would have a huge impact on the contractor market. IR35 is designed to combat potential tax avoidance, by which self-employed contractors supply services to clients through an intermediary commonly known as a personal service company (PSC). IR35 will start on April 6, 2021 and will mean the responsibility for determining whether IR35 rules apply for contractors working for them will fall on the company.

Mr Hayton said: “The banks and the plc market have already made a blanket decision that they will no longer allow IR35 contractors.”

“The problem is a lot of companies have understandably been so focused on dealing with Covid-19 and Brexit that they’re not prepared for IR35.”

“The tech sector has traditionally employed a lot of contractors but if they’re no longer an option the race for talent will get even more competitive and that will add to the skills gap and wage inflation.”

8th February 2021