All enterprises find it hard to attract skilled technology workers. But sometimes it seems that the public sector is fighting the war for talent with one hand tied behind its back.

While demand for staff has been increasing as organisations — particularly in central government — adopt the government policies of in-sourcing and multi-sourcing, since 2010 the UK government has made clear that it does not intend to outsource the job of digital transformation to suppliers.

Organisations have to build their own in-house development and service delivery teams, and placing more staff in strategic functions, to oversee an increasingly complex supplier estate.

GlobalData has found that between 2014/15 and 2015/16, central government spend on technology staff increased by nearly £204m ($248m), even as spend on outsourcing reduced by £145m.

Much of that increase is almost certainly because of government reliance on contract labour.

There are over 18,000 IT contractors in the public sector, outnumbering in-house staff.

Many are working on digital transformation projects and areas of niche expertise such as cybersecurity.

Inflexible pay structures and laborious hiring processes make it difficult to build a workforce of permanent employees, despite many efforts.

Unfortunately, this reliance on contractors will become even more expensive from 6 April as HMRC implements far-reaching changes to the rules governing self-employment.

Liability for ensuring the correct employment taxes are paid will be transferred from workers’ employers to the public sector body using their labour. Private sector employers are not affected, however.

Most public sector bodies are erring on the side of caution and automatically assuming contractors to be inside IR35, meaning that most public sector contractors will pay more tax.

This will either be passed onto their customers, exacerbating already strained public sector finances, or trigger walkouts as they seek work in the private sector instead. Walkouts are already occurring in all parts of the public sector, with no area of contracting affected more than technology.

3 Things That Will Change the World Today

Short of appealing directly to the chancellor, what can technology leaders do?

Economic history tells us that employers often respond to chronic labour shortages by implementing new techniques and technologies which increase productivity.

This step-change is exactly what needs to happen to IT and technology in the public sector in order to deliver the much needed process improvement and automation required at every stage of software delivery.

Let’s also not forget that these new technologies explicitly include human processes: agile, software development , adopting more effective ways to train and retain workers.

Culture and leadership are vital.

GlobalData will be presenting a complementary webinar in partnership with Sogeti to discuss this area in more detail. Please click here to register.