Contract vs. Permanent: Where the UK Market Is Shifting Post-Budget 2024

The UK employment landscape is experiencing a significant transformation in the wake of the 2024 Autumn Budget. As economic pressures mount and new regulations take effect, both employers and candidates are re-evaluating the merits of contract versus permanent roles. Here’s how the market is shifting-and what it means for businesses and jobseekers in 2025.

Rising Costs Drive Flexibility

One of the most impactful changes from the 2024 Budget is the increase in employer National Insurance Contributions (NIC) from 13.8% to 15% starting April 2025. This, combined with a higher National Living Wage, is raising the overall cost of hiring permanent staff. As a result, many companies are reconsidering their workforce strategies, seeking more flexible and cost-effective options.

Surge in Fixed-Term and Contract Roles

A clear trend is the sharp increase in fixed-term contracts, particularly in sectors like IT and professional services. Fixed-term permanent contracts-once rare-have become a preferred option, offering employers the flexibility to adjust headcount without the long-term commitment of traditional permanent hires. These contracts typically last 6-18 months and provide employees with similar rights to permanent staff, but with a defined end date.

At the same time, demand for traditional contractors, especially in IT, has softened, reaching its lowest level since July 2022. This is partly due to economic uncertainty and the desire of businesses to avoid the higher day rates and administrative complexities associated with engaging self-employed contractors.

Contracting Remains Lucrative but Riskier

Despite a dip in demand, contracting still offers significant earning potential-often 2-3 times higher than permanent roles in equivalent positions. Contractors benefit from greater autonomy and flexibility, but must manage their own taxes, benefits, and job security. The Budget’s focus on clamping down on tax avoidance and umbrella company compliance is also prompting businesses to be more cautious when engaging off-payroll workers.

Permanent Roles: Stability, Benefits, and Career Growth

Permanent employment continues to appeal to those seeking stability, structured career progression, and comprehensive benefits such as paid leave, pensions, and healthcare. However, rising employment costs and economic uncertainty mean some employers are less willing to commit to long-term hires, preferring the flexibility of fixed-term or contract arrangements.

Pay - Contract Roles (Higher day/hour rates, no benefits); Permanent Roles (Fixed salary, full benefits).

Security - Contract Roles (Less job security, short notice periods); Permanent Roles (Greater stability, redundancy rights).

Flexibility - Contract Roles (High; control over projects/hours); Permanent Roles (Lower, but growing with hybrid models).

Career Progression - Contract Roles (Limited within company); Permanent Roles (Structured development, promotion).

Tax & Compliance - Contract Roles (Self-managed, IR35 implications); Permanent Roles (Employer-managed, PAYE).

What’s Next for the UK Workforce?

Post-Budget 2024, the UK is firmly in a hirer’s market, with employers holding more power to dictate terms2. The trend toward fixed-term and flexible contracts is expected to continue into 2025, as companies balance the need for agility with the rising costs of permanent employment267. For candidates, the choice between contract and permanent work will depend on their appetite for risk, desire for flexibility, and long-term career goals.

In summary: The UK market is shifting toward greater flexibility, with fixed-term contracts and selective use of contractors becoming the norm. Permanent roles remain attractive for those prioritising stability, but both employers and jobseekers must navigate a more complex, cost-conscious landscape in the year ahead.