Temporary and Contract Hiring in 2025: What You Need to Know

Traditional employment models are being redefined as businesses and workers opt for more flexible and agile workforce styles. Temporary, contract, and contingent workforces are no longer stopgap solutions but instead are being harnessed as critical components of strategic talent management. 

According to Indeed Flex, contingent workers are expected to make up nearly half of the global workforce this year. As businesses confront the challenges of economic fluctuations, skills shortages, shifting worker preferences, and the digital transformation, the demand for non-permanent hiring continues to grow. 

Key trends in temporary and contract hiring

The rise of the gig economy

The gig economy has transitioned from a secondary income source to a primary workforce strategy for businesses across industries, with 35% of the global workforce projected to comprise gig workers. Workers are increasingly drawn to gig roles due to the flexibility and autonomy they offer. For businesses, freelancers and independent contractors provide access to specialised skills without long-term commitments, enabling them to adapt quickly to changing projects and seasonal demands. In the UK, temporary contract roles have significantly risen, with a 24% increase in contractor vacancies between January 2024 and January 2025. 

Direct sourcing and HR-led workforce management

Companies are increasingly adopting direct sourcing, building talent pools of pre-vetted, contract-ready workers, often in collaboration with a Managed Service Provider (MSP). This strategy improves hiring speed, reduces recruitment costs, and improves overall workforce quality by limiting the chance of mis-hires. 

Historically, contingent workforce management fell under procurement departments, focusing on cost-cutting. However, leading businesses now recognise the strategic value of temporary staffing and have shifted responsibility to HR. 

HR-led models emphasise: 

• Skills-based hiring over job titles and credentials
• Global mobility for broader talent pools
• Diversity, Equity, and Inclusion (DE&I) initiatives
• Technology-driven workforce planning

AI-driven workforce management

AI-powered workforce management is helping to transform how businesses handle contingent hiring by making it more efficient. More than 50% of companies will use AI to predict labour needs, streamline hiring by automating tedious processes, optimise staffing levels, and ensure compliance with employment regulations. AI applications include:

• Immediate skills gap assessment
• Automated quality evaluation based on performance
• Flexible pricing strategies for short-term positions
• Detection of compliance risks

Why are more businesses turning to temporary and contract work?

• Flexibility and agility: In uncertain economic climates, businesses must scale their operations quickly to ensure they can access the right talent at the right time. Contract workers allow companies to adjust hiring based on project needs without the long-term financial burden of permanent employees.
• Access to specialised skills: Industries such as engineering, IT, and life sciences require niche expertise that might not be available in-house. Temporary hiring allows companies to bring highly skilled professionals for short-term projects, without investing in full-time salaries.
• Cost savings: Cost efficiency tends to remain a driving force behind this shift. Contingent workforces reduce overhead costs associated with benefits, pensions, and long-term contracts. Integrating AI-driven pricing models optimises workforce costs based on real-time labour market data.
• Diversity, equality, and inclusion: By embracing contingent work, businesses can tap into a more diverse talent pool, including global remote workers, digital nomads, and individuals re-entering the workforce.

Temporary and contract hiring trends in Europe

Europe is a global leader in contingent workforce management, with nine of the world’s fifteen largest agency work markets located in the region. The demand for temporary workers continues to grow, with 24 million individuals (12% of the total workforce) employed under temporary contracts in the EU as of 2022, with global trends following a similar pattern. In the UK alone, there were approximately 1.54 million temporary workers as of January 2025, a notable increase from previous years. This trend will continue as businesses pursue greater workforce flexibility and employees participate in the digital nomadism movement. Digital nomadism has experienced notable growth in recent years, with many individuals choosing this work-life integration mode. This flexible arrangement allows professionals to make the most out of new technologies while working from anywhere in the world, with an estimated over 40 million digital nomads worldwide. While many originate from the US, Europe has the highest number of countries that offer or plan to introduce digital nomad visas. These visas enable remote workers to temporarily reside and work in a foreign country, with Spain being the leading destination for such visas.

The Managed Service Provider (MSP) market has seen exponential growth in Europe, reflecting the increasing reliance on external workforce management expertise. According to the World Employment Confederation, the MSP market has grown substantially, reaching €164bn in 2021. Europe accounts for nearly one-third of the global market value in direct recruitment, MSP, and RPO sectors, noted in major nations such as France, Germany, and the UK.

Contract work in the engineering sector

The engineering industry faces significant talent shortages, making contract work a key solution for addressing labour gaps. Research from Deloitte indicates that between August 2023 and July 2024, the construction sector alone had an average of 382,000 job openings per month, underscoring the difficulty in securing skilled labour. Major infrastructure projects requiring specialised workers such as welders, electricians, automation, and data analysts further complicate this labour mismatch. Engineering and construction (E&C) firms increasingly rely on contractors for large-scale projects such as data centre construction or renewable energy installations. These roles typically require highly specialised expertise not always available within the existing workforce.

The evolving skill landscape is one of the most pressing challenges in the engineering sector. With 44% of infrastructure skill requirements expected to change within the next five years, there’s an urgent need for adaptable hiring strategies. Contract work allows businesses to bring in specialised professionals on a project-by-project basis, ensuring they can keep up with industry advancements without committing to long-term hires.

Industry companies are also leveraging AI-enabled automation and digital tools to enhance workforce management. Digitalisation is driving demand for data analytics, cloud computing, and software development skills. Contract workers often possess these skills, which may be lacking among permanent staff.

Why enlist an MSP for contract hiring?

As contingent workforce management becomes more complex, MSPs play an essential role in helping businesses navigate this evolving landscape. An MSP acts as a strategic partner, overseeing every aspect of a company’s contingent workforce programme, from supplier selection and compliance management to workforce analytics and cost control.

Key benefits of working with an MSP provider:

• Centralised workforce management: Managing everything from supplier selection and order distribution to reporting and consolidated billing. This centralised approach simplifies workforce management while reducing costs.
• Risk mitigation: Labour laws vary widely across regions, making compliance a complex challenge for global organisations. MSPs ensure adherence to local regulations, mitigating risks associated with non-compliance.
• Data-driven decision-making: Modern MSPs leverage technology such as Vendor Management Systems (VMS) to provide real-time analytics on workforce performance. These insights enable organisations to make informed decisions about staffing levels and supplier relationships.
• Cost control: Automated rate benchmarking to effectively manage expenses, reducing the risk of human error and providing more accurate insights into spending patterns. This enables businesses to make informed decisions, leading to cost savings and more efficient resource allocation.
• Global reach: With expertise in various markets, MSPs like NES Advantage assist businesses in navigating regional differences in contingent workforce management, addressing labour challenges, and accessing talent pools in emerging markets.

Modern MSP solutions utilise artificial intelligence (AI) to predict labour needs, evaluate worker performance, and optimise workforce distribution. This enables businesses to make informed staffing decisions, ensuring access to high-quality contract talent while maintaining cost efficiency. 

Next-generation Vendor Management Systems (VMS) integrate candidate sourcing, invoicing, compliance tracking, and performance analytics into centralised platforms for seamless management. These innovations empower businesses to make data-driven staffing adjustments, ensuring that contingent workers are managed with the same level of precision and oversight as permanent employees.

How NES Advantage can help businesses optimise their contingent workforce

As a leading MSP provider, NES Advantage specialises in assisting businesses in efficiently and compliantly managing their contingent workforce. We recognise that contract management presents unique challenges based on various factors, including the types of contracts, the volume of contracts, and the existing tools in place.

Our comprehensive workforce solutions include:

• Strategic workforce planning that aligns contract hiring with business goals.
• AI-powered recruitment tools that enhance hiring speed and accuracy.
• Compliance management expertise, ensuring businesses meet global labour regulations.
• Cost optimisation strategies, including automated rate benchmarking and supplier management.

Do you need help managing your contingent workforce? Contact us today and speak to our MSP team to give your engineering project the advantage.