Some companies use contractors for project-based or time-limited work, but the national data does not show contractors overtaking employees. The latest comparable federal snapshot covers July 2023, and it does not measure how many new hires in 2026 are contractors.
For early-career workers, the better question is whether the contract gives you evidence for a credible next job or only a short paycheck with no clear next step.
Evidence check
Official data does not use contractor as one catch-all label. BLS separately counts independent contractors, temporary help agency workers, workers employed by contract firms, and on-call workers. Full-time describes a work schedule, while employee and contractor describe a work relationship. A contractor can work full time, and an employee can work part time.
In July 2023, independent contractors were 7.4% of total U.S. employment on a sole or main job. Measured separately, 4.3% of workers had a contingent main job, meaning the job was temporary or not expected to last. The categories can overlap, and most workers remained in traditional arrangements.
For federal tax purposes, the label alone does not decide worker status. The IRS looks at behavioral control, financial control, and the type of relationship.
Scope and limits. The BLS release is a household survey about jobs held in July 2023. It does not measure 2026 job postings, new hires, employer motives, or whether a specific contract will convert.
Sources checked August 19, 2026. BLS Contingent and Alternative Employment Arrangements and IRS worker-classification guidance.
Table of Contents
Why are companies hiring contractors instead of full-time employees?
A company may hire a contractor when the work has a defined end date, needs a skill the team does not keep in-house, or is routed through a staffing or contract firm. That does not mean every arrangement lowers cost, and the BLS data does not tell us why each company chose it.
Everyday speech blurs several arrangements under the word contractor, even though self-employment, temporary-agency work, and contract-firm employment assign taxes and benefits differently. Ask who employs you, who supervises the work, and what ends the assignment.
Why do some graduates start in temporary or contract roles?
Some graduates start in temporary or contract roles, but federal data does not show a universal graduate-to-contract pipeline. A role may be described as contract-to-hire, yet conversion is only realistic when the employer states the process and can explain what happened to the last completed cohort. Treat conversion as a question to verify, not a trial period built into the label.
This pattern shows up across industries, including ones that don’t feel project-based. After struggling to secure a direct lab role after graduation, Jessie got into pharmaceutical research through a contracting company that places scientists in lab positions. The contract gave her tangible experience and a foot in the door while the permanent-hire question stayed open on both sides.
Why does contract or freelance work often feel unstable?
Contract or freelance work feels unstable when an assignment has an end date and no next assignment is promised. The arrangement determines the rest. Independent contractors handle federal taxes differently from temporary-agency employees, while benefits depend on the agreement or employer.
In documentary production, Owen described freelance work as financially stressful because projects arrive unpredictably. When the pipeline pauses, so does the paycheck. That rhythm is hard to plan around, especially early in a career when savings are thin and the next project is still uncertain.
Does AI work rely heavily on contractors?
Some AI projects use short-term contractors for model testing and related project work, but one story does not establish an industry-wide hiring pattern. The BLS survey does not isolate AI work, so it cannot tell us whether AI companies rely on contractors more than other employers.
Vlad, a mathematics PhD, earns income by testing and challenging AI models for multiple companies. Some weeks there’s plenty of work. Other weeks there’s nothing. The income is real but unreliable, and there’s no path to permanence built into the structure of the work itself.
Why do companies sometimes convert employees into contractors?
Changing a title from employee to contractor does not settle U.S. federal tax status because the IRS examines behavioral control, financial control, and the type of relationship. A remote move or cross-border arrangement changes some facts, but the correct classification still depends on the whole relationship and the laws that apply.
During the pandemic, Brandon moved from New York to Canada and his finance firm converted his position from employee to contractor so he could keep working. It was a practical fix, not a permanent plan. The contract eventually ended because the company didn’t want to build out a permanent international employment structure. Contractor status had been a bridge, not a destination.
Are contractors becoming a permanent part of the workforce?
Contractors are an established part of the workforce, but the available national data cannot tell us whether their share will keep rising or what happened after July 2023. Independent contractors were 6.9% of workers in May 2017 and 7.4% in July 2023, a difference of 0.5 percentage points across two snapshots, while most workers remained in traditional arrangements.
Be careful with trend claims. The BLS survey compares two dates six years apart and measures workers’ sole or main jobs, not the mix of job postings, offers, or hires in 2026. It does not establish a steady rise or show that companies now hire more contractors than employees.
The result is a labor market where contractors and full-time employees often work side by side on the same teams, but with very different levels of security, benefits, and visibility into what comes next. Across GradSimple’s interviews, the useful question is rarely whether contract work is good or bad in general. It is whether that specific contract gives you skills, references, and a credible next step. If you’re trying to figure out whether a contract role in a specific field is a bridge or just a holding pattern, GradSimple Insiders gives you insider interviews, hiring reality, and market signals from people closer to those paths.
FAQ
Are companies hiring more contractors than full-time employees?
Some companies do for certain projects, but national BLS data does not show contractors overtaking employees. The latest comparable federal snapshot covers July 2023, not 2026 hiring.
Why do companies prefer contractors?
A company may use contractors for a defined project, a temporary workload, or expertise it does not keep in-house. The reason varies, and the worker’s legal status depends on the relationship rather than the label.
Is contract work bad for early-career professionals?
It depends on what the contract offers. A role that gives you real experience, a strong name on your resume, and a path to conversion is worth taking. One with no training, no benefits, and no clear next step is harder to justify.
How do you know if a contract role is worth taking?
Ask what skills you’ll build, whether conversion is realistic, who you’ll work with, how long the contract runs, and what happens when it ends. A contract should give you more than a temporary paycheck.
