The Chief Economist at the Bank of England Andrew Haldane made a statement (http://www.bbc.co.uk/news/business-29656342) last week that ‘interest rates should remain low to avoid long-term economic stagnation’. There are a number of opinions on when this will happen but The Guardian (http://www.theguardian.com/business/2014/oct/19/decision-interest-rates-held-between-agony-ecstasy) recently reported the rise will likely be around August next year.
What do interest rates mean and how do they affect contractors?
Interest rates are simply the cost associated with borrowing money. Low interest rates mean paying less on your mortgage and other loans whereas high interest rates are better when investing money in savings accounts.
If the rate of interest rises both home and work lives will be affected for many people. For contract worker using recruitment agencies have you thought about this…
If you are paid every week by your recruitment agency but they aren’t paid by their client until 4-6 weeks later, most agencies will have to borrow money to fund your pay. Many recruitment agencies use invoice discounting or factoring services to do this, but if the cost of borrowing for an agency goes up, they will only have three choices to cover this expense:
1 – Charge their client
2 – Take the charge themselves
3- Reduce contractor pay
What do you think recruitment agencies will do?
To read the full article from Paraplus on ‘How a Rise in Interest Rates Will Affect Contractors’click here. (http://www.umbrellaparaplus.co.uk/how-a-rise-in-interest-rates-will-affect-contractor-workers)