2025 NIC Increase: Contract v Permanent hires. Which will suit you best?

Do uncertain times call for a break from your usual hiring strategies?

With the UK government’s proposed increase in employers’ national insurance contributions (NICs) in April 2025, many employers are re-evaluating the pros and cons of (outside of IR35) Contractors versus Permanent hires.

The looming NIC hike has left many employers in limbo. Is it worthwhile bringing in a contractor for now? Or should we wait it out? Will a contractor hire even meet my needs? As always, it’s not that straightforward.

Contract vs. Permanent Employees: The Pros & Cons

The advantages of contractors often mirror the disadvantages of permanent employees and vice versa. Instead of a generic pros and cons list, here are some key business requirements paired with a verdict on which hiring strategy might work best.

• Access to Highly Skilled Professionals

Contractors have chosen the flexibility and risks of self-employment, often because they are confident in their skills and experience. As a result, the contractor pool is filled with highly qualified candidates who may not be easily available in the permanent job market.

Permanent employees, on the other hand, can be tailored to fit the company’s specific processes and values, and employers can invest in upskilling them to meet precise needs—though this takes time.

With the NIC increase potentially making permanent employees more costly, finding adaptable staff with the right skillsets could become even more challenging.

Our Verdict: Contractors

• When Culture is Important

A strong company culture is vital to productivity and overall success. While contractors can integrate into teams temporarily, their transient nature means they can’t contribute meaningfully to long-term cultural development.

The Verdict: Permanent Employees

• Speed of Hire

Hiring permanent employees is often seen as a drawn-out process, but with tools like video interviews and effective skillset screening, time-to-hire can be reduced to as little as three weeks. For contractors, the time-to-hire is often less than 48 hours, as they generally don’t have notice periods.

The Verdict: Contractors - if the role is truly urgent, or demands a specific skillset not available in your current teams.

• Investing in Your Future

A company’s success relies heavily on its people. While contractors can help achieve short-term goals, they leave with the skills and experience gained during their time with the business. Permanent employees offer the opportunity to build a team aligned with long-term goals.

The Verdict: Permanent Professionals

• Hit the Ground Running

Contractors are typically hired for specific transformation projects and short-term periods. They’re experienced in jumping in with minimal onboarding, making them ideal for fast-paced or highly specialized roles, while permanent employees are often employed on their potential, meaning it could take time & training for them to fully grow into a new role.

Our Verdict: Contractors

• A Job That May Ruffle Feathers

Contractors are often better suited to handle sensitive tasks, such as change management or restructuring, as their short-term presence allows them to remain impartial and focus on results rather than long-term relationships or worrying about internal politics.

Our Verdict: Contractors

• Costs

The financial comparison is complex. Contractors usually charge more per hour to account for the uncertainty of freelancing. On the other hand, employers avoid the additional costs associated with permanent employees — such as national insurance, pension contributions, and holiday pay—which are set to increase with the proposed NIC rise.

Contractors can also provide flexibility, allowing businesses to scale up or down based on demand, which can reduce idle workforce costs.

The Verdict: A Draw

How Can You Calculate the Real Cost of Hiring?

What will be the true cost of bringing on new hires—whether as permanent employees or contractors—when factoring in increased national insurance contributions, training needs, or rising salary expectations? Use our True Cost to Hire Calculator to find out quickly and make an informed decision.