Rising employment costs leads firms to make cuts on full-time hiring
Workers looking for the security of a permanent job may face a tougher employment market, as new YouGov data commissioned by Employment Hero, the AI-powered employment platform, shows 39% of UK businesses have reduced full-time recruitment while a quarter say they are hiring more freelancers and contractors.
Against a backdrop of rising unemployment, the findings suggest the UK jobs market is changing in a way that could reshape how people find work, build experience and plan their careers.
The research, based on a survey of more than 1,000 UK business leaders, found that full-time employment costs have risen by almost 10% in the past year. At the same time, a quarter of businesses (25%) say they are hiring more freelancers and contractors, and plan to continue doing so.
An untethered workforce emerges
Employment Hero describes the trend as the emergence of an “untethered workforce” – a labour market where businesses still need people, skills and output, but are becoming more cautious about taking on the legal, financial and administrative commitments of permanent employment.
For some workers, this could bring more control over when, where and how they work. For others, particularly those who want regular income, paid leave, career progression and the protections that come with employment, it could make working life feel less certain.
The data suggests the shift is not being driven by cost alone. Almost half of businesses moving to contractors cited flexibility as a reason for doing so (49%). Avoiding long-term commitment (43%) and accessing specialist skills (40%) were cited as next most important. Cost, at 34%, ranked lower.
The traditional job path is changing
The findings suggest businesses are still looking for talent, but are changing how they bring that talent in. Instead of relying only on permanent roles, more are using freelancers and contractors to meet demand without adding fixed employment commitments.
As this trend emerges, UK workers may need to prepare for a jobs market where permanent roles are harder to rely on, and where freelance and contract work become a bigger part of how people earn, build experience and plan their careers.
Kevin Fitzgerald, UK managing director at Employment Hero, said: “Permanent employment has long been seen as the traditional route into the workforce, but that assumption is being tested as the landscape changes for the businesses doing the hiring. If companies are reducing full-time recruitment and turning more towards freelancers and contractors, it changes the shape of the market for workers.
“A graduate looking for a first role, a parent returning to work, or someone trying to move into a new sector may increasingly need to think about short-term contracts or freelance work as part of their career plan. That raises practical questions around how your income works, how you build a portfolio of experience and securing future employment.