TLDR: A recent report reveals a significant slowdown in permanent hiring, driven by escalating cost pressures, persistent talent shortages, and a strategic pivot by businesses towards more flexible, temporary employment models to mitigate economic uncertainties.
Dublin, Ireland – The landscape of permanent employment is undergoing a notable transformation, with a new report highlighting a significant deceleration in permanent hiring across Irish businesses. According to the Employment and Recruitment Federation’s (ERF) Q2 2025 Labour Market Monitor, compiled by Ipsos B&A, companies are increasingly opting for temporary and project-based roles as they navigate a complex economic environment.
The report identifies three primary factors contributing to this shift. Firstly, mounting cost pressures are compelling firms to reassess their long-term staffing commitments. These pressures include increases in the minimum wage, changes to PRSI (Pay Related Social Insurance), and the introduction of statutory sick pay. This financial strain is leading businesses to adopt more cautious hiring practices.
Secondly, a persistent and widening skills gap continues to challenge employers. The Monitor found that a striking 83% of businesses are struggling to find candidates possessing the requisite skills, particularly in high-demand sectors such as IT/data, engineering, logistics, and operations. This shortage forces companies to either delay hiring or seek alternative, more flexible solutions.
Lastly, businesses are strategically managing risk in a market characterized by scarce skills and rising operational costs. Siobhán Kinsella, President of the ERF, commented on this trend, stating, “We’re seeing employers adapt in real time to the pressures they face, and that means leaning more heavily on temporary and project-based work. This isn’t about a lack of confidence. It’s about managing risk in a market where skills are scarce, and costs are up.” This pivot towards flexible hiring is a direct response to global uncertainties, including transatlantic trade issues and evolving workforce demands.
While permanent hiring activity saw declines in April and May before stabilizing in June, and contract hiring trended downwards throughout the quarter, there was a contrasting increase in temporary placements. Approximately 39% of ERF member firms reported an uptick in temporary roles during May and June, indicating a clear preference for agility. Despite these adjustments in hiring strategies, the overall labor market remains resilient, with employment reaching a record 2.81 million in June and unemployment holding steady at 4.0%. Wage growth has also eased compared to the first quarter, further influencing hiring decisions.
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Kinsella emphasized the need for supportive policies, adding, “The fundamentals remain solid, but we can’t ignore the mounting complexity. Employers need responsive policies that match today’s labour challenges, and that include prioritising investment in training and skills.” The ERF’s real-time data serves as an early indicator of the evolving market, suggesting a sustained move towards flexible workforce models rather than broad expansion.
