The U.S. workforce is now 38% contract, freelance, or gig workers—up from 32% in 2023.

Companies posted 2.3 million contract roles in Q3 2025, compared to 1.7 million in Q3 2024—a 35% increase.

Meanwhile, full-time job postings increased only 8% over the same period.

The shift is real, and it's accelerating. Companies that once hired full-time employees by default are now hiring contractors first and considering full-time "if it works out."

The reasons go beyond cost savings. Companies want flexibility, reduced commitment, and the ability to scale hiring up or down without layoffs.

Here's what's actually driving the contract workforce boom—and what it means for recruiting.

The Numbers: Contract vs. Full-Time Hiring

Data from Staffing Industry Analysts shows the shift:

2023:

• Full-time job postings: 7.8 million
• Contract job postings: 1.7 million
• Contract as % of total: 18%

2025 (Q3):

• Full-time job postings: 8.4 million
• Contract job postings: 2.3 million
• Contract as % of total: 21%

Contract work is growing 4x faster than full-time hiring.

Most common contract roles in 2025:

1. Software engineering and IT (42% of contract postings)
2. Marketing and creative (18%)
3. Finance and accounting (12%)
4. Operations and project management (11%)
5. Sales and business development (8%)
6. HR and recruiting (5%)
7. Other (4%)

Even roles traditionally hired full-time—finance, operations, HR—are increasingly posted as contract positions.

Why Companies Are Choosing Contractors Over Full-Time

SHRM surveyed 940 hiring managers about why they're hiring more contractors. The answers aren't what you'd expect.

Reason #1: Flexibility (cited by 68%)

Not cost savings—flexibility.

What hiring managers said:

"We're not sure how much demand we'll have in Q1. Contractors let us scale up fast if needed, or wind down if business slows."

"Hiring full-time means commitment. What if we need to cut headcount next year? Contractors give us options."

"Projects come and go. We need people for 3-6 months, not forever."

Companies are treating employment like gig platforms treat rides: hire when you need it, end when you don't.

Reason #2: Avoiding Layoffs (cited by 51%)

Companies are haunted by 2023-2024 tech layoffs.

Over 400,000 tech workers were laid off in 2023-2024. Those layoffs damaged employer brands and created PR nightmares.

The logic: If we hire contractors instead of full-time employees, we can reduce headcount without "layoffs."

Ending a contractor engagement feels different than laying off employees—even though the worker still loses their job.

Hiring manager quote:

"After the layoffs in 2023, leadership doesn't want to hire full-time unless absolutely necessary. Contractors give us deniability—we can say 'contract ended' instead of 'laid off.'"

Reason #3: Speed (cited by 47%)

Hiring contractors is faster than hiring full-time employees.

Average time-to-hire for full-time employees: 44 days. Average time-to-engage contractors: 12 days.

Why contractors are faster:

• Fewer interview rounds (contractors expect faster processes)
• No relocation or benefits negotiations
• Contractors are ready to start immediately (no two-week notice periods)
• Less internal approval needed (contractors often come from pre-approved budgets)

Hiring manager quote:

"We needed an engineer in two weeks. Full-time hiring would take two months. We hired a contractor and had them working in 10 days."

Reason #4: Access to Specialized Skills (cited by 42%)

Some skills are rare and expensive to hire full-time.

Companies increasingly hire contractors for specialized projects instead of maintaining full-time specialists.

Examples:

• Machine learning engineers (for a 6-month AI project)
• Cybersecurity specialists (for compliance audit)
• Salesforce developers (for CRM implementation)
• Change management consultants (for org restructuring)

Hiring manager quote:

"We need a machine learning engineer for one project. Hiring full-time means paying $200K+ salary forever. Hiring a contractor for 6 months costs $150K and we're done."

Reason #5: Cost (cited by 38%)

Yes, cost matters—but it's #5, not #1.

Contractors cost more per hour but less overall because companies avoid benefits, taxes, and long-term commitment.

Cost breakdown example (Software Engineer):

Full-time:

• Salary: $140,000/year
• Benefits (health, 401k, PTO): $35,000/year
• Payroll taxes: $10,000/year
• Total annual cost: $185,000
• Ongoing commitment: Forever

Contractor:

• Hourly rate: $100/hour
• 40 hours/week × 52 weeks = 2,080 hours
• Annual cost: $208,000
• Commitment: Contract length only (3-12 months)

Contractors cost more per year, but companies can end contracts anytime. Full-time employees are cheaper annually but cost more long-term if business needs change.

What Workers Think About The Shift

Not all contractors are happy about it.

Survey of 1,400 contract workers (MBO Partners, 2025):

48% prefer contract work:

• Higher pay
• More flexibility
• Variety of projects
• Control over schedule

52% would prefer full-time roles:

• Want job security
• Need benefits (health insurance)
• Tired of uncertainty
• Want career progression

Many contractors are contractors because companies won't hire them full-time—not because they prefer it.

Contractor quote:

"I've been contracting for 3 years. Companies say 'maybe we'll convert you to full-time' but it never happens. I'd take a full-time role tomorrow if someone offered it."

The Recruiting Challenges

If your company is shifting to contractors, recruiting changes dramatically.

Challenge #1: Different sourcing channels

Contractors aren't on Indeed or LinkedIn Jobs looking for full-time roles.

Where to find contractors:

• Upwork, Toptal, Fiverr (gig platforms)
• Staffing agencies
• LinkedIn (but search for "contract open to work")
• Contractor networks and communities
• Former full-time employees who went independent

Challenge #2: Different value propositions

Full-time candidates care about: benefits, culture, career growth, stability.

Contractors care about: pay rate, project scope, duration, interesting work.

Your recruiting pitch must change.

Bad contractor pitch: "We have great culture and benefits!"

Good contractor pitch: "We need someone to build X in 4 months. Rate is $Y/hour. Here's the tech stack and team you'll work with."

Challenge #3: Compliance and classification

Misclassifying employees as contractors is illegal and expensive.

The DOL and IRS are cracking down on misclassification. Penalties include back pay, benefits, taxes, and fines.

If contractors:

• Work full-time hours exclusively for you
• Use company email and equipment
• Attend all company meetings
• Have no other clients
• Work indefinitely with no end date

They're probably misclassified employees.

Use staffing agencies or contract management platforms to reduce classification risk.

Challenge #4: Converting contractors to full-time

Many companies hire contractors with the intent to "convert them if it works out."

Conversion rates are lower than expected: only 22% of contractors get converted to full-time.

Why conversions fail:

• Company budget constraints
• Contractor prefers contracting
• Role no longer needed after project ends
• Hiring freezes prevent conversion

Don't promise conversion unless you're committed. Contractors talk—if you routinely promise conversion and don't deliver, word spreads.

Industries Leading The Shift

Not all industries are embracing contractors equally:

Highest contractor usage (>40% of workforce):

• Technology and software
• Marketing and advertising agencies
• Consulting and professional services
• Media and entertainment

Moderate contractor usage (20-40%):

• Finance and banking (for projects)
• Healthcare (travel nurses, locum tenens)
• Manufacturing (engineers for specific projects)

Low contractor usage (<20%):

• Retail (prefers part-time employees over contractors)
• Hospitality and food service
• Education (mostly full-time faculty/staff)

Tech leads the way with 47% of its workforce now contract or freelance.

The Bottom Line

Contract and gig workers now make up 38% of the U.S. workforce—and growing.

Why companies prefer contractors:

1. Flexibility (scale up/down without layoffs)
2. Avoid layoffs (end contracts instead)
3. Speed (hire faster)
4. Access to specialists (for short-term needs)
5. Cost (lower long-term commitment)

What this means for recruiting:

✅ Learn contractor sourcing: Upwork, staffing agencies, contractor networks

✅ Adjust your pitch: Contractors care about pay, project scope, and duration—not culture and benefits

✅ Understand compliance: Misclassification is illegal and expensive

✅ Manage conversion expectations: Don't promise full-time conversion unless you can deliver

The shift to contractors isn't temporary. Companies discovered in 2023-2024 that contractors provide flexibility without layoffs.

If you're still recruiting like it's 2020 (full-time only), you're missing 38% of the workforce—and that number is growing.

Sources:

• MBO Partners: State of Independence 2025
• Staffing Industry Analysts: Contract Labor Trends
• SHRM: Why Companies Hire Contractors
• Indeed: Contract vs. Full-Time Hiring Trends
• DOL: Employee Misclassification
• Glassdoor: Contract Worker Satisfaction