Contracting, once a lucrative pursuit for all parties involved - including the contract house, the contractor and the employer - is in a serious decline in SA due to the tightening up on tax and labour legislation over the last two government budgets, said Org Geldenhuys, a director of Pretoria-based IT recruitment house, Abacus Recruitment.
"Until recently, being a contractor was often exceedingly lucrative. But lately the government has been tying up all the apparent loopholes - and this is having a negative financial impact on all concerned."
He said that until recently contractors could get tax directives as low as 20%, but this has now risen to above 30%, "making things a lot less lucrative".
"In addition, in terms of new labour legislation - which has changed markedly - employers have to budget for leave, sick leave, compassionate leave, as well as the skills development level and UIF payments for contractors. Suddenly the entire scenario has swung almost 360 degrees. Moreover, in terms of the new legislation, if contractors work a certain number of hours each week for the same company they are now regarded as permanent staff.
"Because of all these changes were are noticing that an increasing number of contractors are coming to us complaining that their contracts are not being renewed - and they are battling to find work. Many of the benefits of employing contractors have now disappeared out of the window."
Geldenhuys said that employers are also looking for workers with a stable track record. Because contractors move from company to company they are frequently seen as less stable, or less ideal as a good asset for a company. While in the past this could have been overlooked - as there were other cost advantages - it is now becoming more of an issue.
"Frankly I think the contracting side of our business is going to shrink. We are making allowances for this and are slowly changing our own focus. Without being a doomsayer, if I was a contractor I would perhaps start looking for a permanent post."
He said the contracting industry - particularly in the IT sector - is also under strain in the UK. But this is more as a result of an economic downturn, or a static market. "Contracting is going through a downturn in the UK according to the latest statistics, but this may change when the economy rebounds, or improves. Our downturn is more serious because it is not due to the economy but rather blame can be put at the door of evolving legislation. The fall-out is definitely going to be more sustained."