Irish businesses are adjusting their hiring strategies in response to mounting economic pressures, according to the Employment and Recruitment Federation’s (ERF) Q2 2025 Labour Market Monitor.

The report shows a significant slowdown in permanent hiring, as employers increasingly turn to temporary and project-based roles to meet workforce demands.

The shift comes as companies grapple with wage inflation, policy changes, and persistent talent shortages.

The report, conducted by Ipsos B&A for the ERF, highlights how cost pressures—such as increased minimum wage, PRSI changes, and statutory sick pay—are driving firms to reassess long-term staffing commitments.

Permanent hiring activity declined in April and May before showing signs of stabilisation in June.

Meanwhile, contract hiring continued to trend downward throughout the quarter.

In contrast, 39% of ERF member firms reported an increase in temporary placements during May and June.

However, this contrasts with national data from the CSO, which indicates a broader decline in agency work since 2023, pointing to diverging sectoral trends.

“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,” said Siobhán Kinsella, President of the ERF.

“This isn’t about a lack of confidence. It’s about managing risk in a market where skills are scarce, and costs are up.”

The labour market continues to show resilience overall.

Employment reached a record 2.81 million in June, with unemployment holding steady at 4.0%.

Yet beneath the surface, the report signals a pivot toward flexible hiring strategies rather than expansion.

Among the most pressing concerns for employers is the ongoing skills gap.

The Monitor found that 83% of businesses are struggling to find candidates with the right skills, particularly in IT/data, engineering, logistics, and operations.

Although wage growth has eased compared to Q1, temporary roles in specialist fields are commanding higher pay as firms compete for limited talent.

“The fundamentals remain solid, but we can’t ignore the mounting complexity,” Kinsella added.

“Employers need responsive policies that match today’s labour challenges, and that include prioritising investment in training and skills.”

With global uncertainties—from transatlantic trade issues to shifting workforce demands—also influencing hiring decisions, the ERF’s real-time member data offers an early indicator of where the market may be heading next.