Report: Recession Worries Lead Firms to Turn to Contract Employees

More and more American businesses are hiring temporary contract employees as recession fears increase.

Companies posted 26% more openings for contract workers between May and November this year versus the same period in 2021, the Financial Times (FT) reported Thursday (Dec. 21), citing data from LinkedIn.

Postings for full-time positions increased just 6% during the same period, while the Department of Labor reports a decline in new job postings for October.

“We are starting to see power shift back towards employers a little bit,” Christine Castaneda, the head of professional recruitment at staffing company LHH, said in an interview with the FT. “Employers are being more conservative.”

Among those companies is Alleyoop, a beauty product brand that planned to hire 10 to 15 permanent workers next year, but instead decided to go with just four, filling the other roles with contractors and freelancers.

“When the market started slowing down, I got a little more selective about it,” Alleyoop founder David Manshoory said. “And I was like, let’s go lean in and hire … the key roles, and then leverage freelancers for the ones that are more nice to have, or where we feel like people enjoy being freelancers.”

These findings are in keeping with research by PYMNTS. As we noted last month, we’ve seen a growing number of people using gig economy platforms to take advantage of the on-demand work trend as inflation continues to hover near record highs.

Most gig economy platforms interviewed in a recent PYMNTS study forecast double-digit growth in the number of 1099 workers they will need to pay next year.

The rising demand from companies seeking freelancers and growing supply have shown up in the numbers: 87% of gig economy companies say they expect their payables volume to grow more than 10% through the next three years.

However, 17% of the gig economy companies surveyed say payables inefficiencies are their most pressing challenge. The most crucial payment methods right now are the fastest ones, including RTP, push-to-card methods and PayPal.

The companies looking for freelance talent cannot handle all of this in-house — there are legal requirements tied to connecting 1099s before payments, and the hurdle of utilizing tech infrastructure for mass payouts.

“The ‘supply chain’ of onboarding gig workers or sending payments gets more complex, and the number of steps gets compounded,” Routable Co-founder and CEO Omri Mor told PYMNTS.

Research by his company and PYMNTS found that 2/3 of platforms that pay more than 2,500 workers say that automation is among their chief priorities.