Permanent Hiring Is Losing Its Grip as Businesses Turn to Flexible Talent
- 4 Min Read
As employment costs rise and economic uncertainty persists, UK businesses are increasingly turning to freelancers and contractors instead of permanent hires. New research from Employment Hero highlights the emergence of an “untethered workforce”, raising important questions for HR leaders around workforce planning, culture, compliance and long-term talent strategy.
- Author: HRD Connect
- Date published: Jun 1, 2026
- Categories
Permanent employment has long been the default route for workforce growth. Yet rising employment costs, economic uncertainty and changing skills demands are prompting many UK businesses to rethink how they access talent.
New YouGov data commissioned by Employment Hero suggests organisations are becoming more cautious about adding permanent headcount. The research, based on 1,016 UK business leaders, found that full-time employment costs have risen by almost 10% over the past year. In response, 39% of UK businesses have reduced full-time recruitment, while 25% are increasing their use of freelancers and contractors and expect to continue doing so.
Employment Hero describes this as the rise of an “untethered workforce”: a labour market where businesses still need skills, capacity and output, but are becoming more careful about the fixed costs and long-term commitments linked to permanent employment.
For HR leaders, this is not simply a recruitment trend. It signals a broader shift in workforce planning, with implications for compliance, culture, onboarding and long-term capability.
Permanent hiring is becoming a more cautious decision
The findings suggest employers are not abandoning growth, but they are becoming more selective about how they resource it.
While cost pressure is an important factor, it is not the only driver. Almost half of businesses moving toward contractors cited flexibility as a reason for doing so, followed by avoiding long-term commitments and accessing specialist skills. Cost ranked lower, cited by just over a third of respondents.
This matters because it suggests the move toward contingent labour is not purely defensive. Businesses are looking for more adaptable workforce models that can respond quickly to changing demand, project cycles and skills requirements.
Workforce planning is becoming more complex
For HR teams, the shift toward freelancers and contractors changes the shape of workforce planning.
Organisations can gain access to specialist expertise without committing to permanent roles, which can be valuable in areas where skills demand is changing quickly. However, a more blended workforce also creates new challenges around workforce visibility, compliance, contractor management and knowledge transfer.
HR leaders will need to ensure that decisions about permanent and contingent talent are not made in isolation. The key question is no longer simply how many people the organisation needs, but what type of workforce model best supports business continuity, flexibility and growth.
The traditional career path is under pressure
The findings also carry implications for workers.
Permanent employment has traditionally provided structure around income, development, benefits and progression. If full-time recruitment becomes harder to access, more workers may need to build careers through short-term contracts, freelance assignments and project-based work.
Kevin Fitzgerald, UK Managing Director at Employment Hero, said the traditional route into the workforce is being tested as businesses change how they hire. For graduates, returning parents and career changers, this may mean thinking differently about how to build experience, manage income and secure future employment.
For HR leaders, this raises questions about how organisations attract and engage talent that may no longer sit neatly within permanent employee structures.
Culture cannot stop at the permanent workforce
A more flexible workforce can support agility, but it also creates cultural risks.
If contractors and freelancers are excluded from communication, onboarding and knowledge-sharing, organisations may struggle to maintain consistency and collaboration. This is especially important in roles where external talent is contributing to strategic projects or working closely with permanent teams.
HR will need to think more carefully about how to create connection across different types of worker while maintaining the right legal and contractual boundaries. Culture, values and ways of working must be clear enough to guide everyone contributing to the organisation, not only those on permanent contracts.
Flexibility needs governance
The rise of flexible talent does not remove responsibility from employers. It increases the need for clear governance.
Businesses using more contractors and freelancers will need robust processes around classification, contracts, onboarding, data access, confidentiality, performance expectations and compliance. Without this, the flexibility organisations gain may be offset by operational and legal risk.
The most effective workforce strategies will balance agility with structure. They will allow organisations to access talent quickly while ensuring that workforce decisions remain aligned with business strategy, risk management and long-term capability building.
A new workforce model is taking shape
Rising employment costs are accelerating a shift that was already underway. Businesses are looking for workforce models that are more flexible, skills-led and responsive to uncertainty.
For HR leaders, the opportunity is to shape this transition deliberately. The goal should not be to replace permanent employees with contractors, but to build the right mix of talent for the organisation’s needs.
Permanent hiring may no longer hold the same dominance it once did. But the core challenge remains the same: ensuring businesses have the people, skills and structure they need to perform sustainably.
