Construction and transport drive hiring growth while high-tech and services sectors lose 71,000 jobs; employers increasingly turn to contract recruitment amid rising employment costs.
Ireland’s labour market is increasingly being shaped by two very different trends, with strong job creation in construction, industry and transport offset by significant losses across high-tech and labour-intensive services.
That’s according to the Employment and Recruitment Federation’s (ERF) Irish Labour Market Monitor for Q2 2026.
“Employers have not stopped hiring. They have changed how they hire”
The report, based on CSO data and research conducted by Ipsos B&A on behalf of the ERF and supported by ICON Accounting, shows employment in construction, industry and transport increased by 56,500 jobs in the year to Q1 2026.
At the same time, high-tech services sectors lost 35,000 roles, while labour-intensive services sectors shed a further 36,000 jobs. Overall employment remained largely unchanged at 2.79 million compared with Q1 2025, while the labour force grew by just 0.6%, marking the smallest annual increase in five years.
The findings point to a labour market undergoing significant structural change, with employers adapting their recruitment strategies in response to uncertainty and rising employment costs.
Contract hiring back in vogue
The research found businesses are increasingly opting for contract recruitment rather than permanent appointments.
In June, 52% of recruiters filled contract vacancies, up from 41% in April. The proportion of recruiters reporting increased contract placements compared with the previous month doubled during the quarter, rising from 16% to 32%.
Permanent recruitment remained relatively stable during the same period, while temporary employment continued to soften. A total of 101,900 people were engaged in temporary agency work during Q1 2026, down 9,400 from the final quarter of 2025. Just 24% of agencies reported an increase in temporary vacancies filled in June, compared with 36% in May.
Siobhán Kinsella, President of the ERF, said employers are actively changing how they approach recruitment.
“Employers have not stopped hiring. They have changed how they hire. When the outlook is this uncertain, a contract gets a business the skills it needs now without a permanent commitment it might regret in six months. What we are watching is a services sector shedding roles at the same time as construction and transport cannot fill them, and very few of those people move straight across.”
Labour costs become a growing concern
The report identifies rising employment costs as a key challenge, particularly for SMEs and labour-intensive businesses.
According to CSO figures cited in the Monitor, average hourly total labour costs increased by 17.4% over the three years to Q1 2026, rising from €33.15 to €38.92 per hour.
Businesses are also preparing for further cost increases. Employer and employee PRSI rates are due to increase again on 1 October 2026. These changes follow January’s increase in the national minimum wage to €14.15 an hour and the introduction of employer contributions under the My Future Fund automatic enrolment pension scheme.
Kinsella said the cumulative impact is already influencing business decisions ahead of Budget 2027.
“The cost of employing someone in Ireland is up 17% in three years and another PRSI increase lands in October. For a small business in a labour-intensive sector, that is often the difference between creating a role and leaving the work undone. Those calls are being made this month, not in the Budget week, and they will show up in the employment figures for next year.”
Hiring challenges persist
While some sectors are experiencing softer demand, recruiters continue to report difficulties filling permanent vacancies.
In June, 58% of recruiters said the time required to fill permanent positions had increased compared with three months earlier, while 40% reported no change. For contract roles, 55% said hiring times remained stable and 40% reported an increase.
The ERF noted that its findings differ from some employer surveys that have reported shorter average hiring times. The recruitment federation said its measure reflects changes experienced by recruitment firms working on specialist and harder-to-fill roles rather than a market-wide average.
Demand from employers remained resilient throughout the quarter, with as many as 76% of recruiters reporting that they had secured new clients during the previous month.
Full employment continues despite slowdown
The report comes as Ireland continues to maintain historically low unemployment levels.
The seasonally adjusted unemployment rate edged up to 5.0% in June 2026 from 4.9% in May. However, unemployment has now remained at or below 5% for 54 consecutive months, representing the longest period of sustained full employment on record.
Looking ahead, the Central Bank of Ireland has revised its 2026 employment growth forecast down to 1.2%, while projecting growth of 2% in 2027.
Recruitment firms nevertheless ended the quarter on a more optimistic note. In June, 41% reported a more positive outlook for vacancies over the following three months, up from 35% in May, suggesting confidence remains despite mounting cost pressures and shifting employment patterns.
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