91% of companies are increasing contractor hiring. Here's why.

The flexible workforce is the backbone of the AI boom. 

As companies across every industry race to turn AI capabilities into competitive advantage, they increasingly require talent that can move as fast as the technology itself. 

Remote is seeing this play out firsthand across our customer base. Large companies are hiring contractors to perform AI data annotation work at scale. Midmarket companies are hiring freelancers on the other side of the world to access specialized AI expertise that doesn't exist in their local markets. Frontier AI labs increasingly rely on contract data labelers, annotators, subject matter experts, and quality assurance specialists to handle the scale of data preparation and model evaluation their development requires.

For decades, contractors occupied a specific role in the corporate ecosystem: tactical additions to permanent teams, brought in for specialized projects or seasonal fluctuations. But the demands of the AI era have rewritten that playbook entirely. The flexible workforce is now the engine powering AI transformation globally.

The data is stark. Earlier this year, Remote asked more than 3,200 business leaders across eight countries about how their companies rely on freelance talent. More than 90% increased their contractor and flexible worker hiring over the past two years, with 41% increasing significantly. When asked why, 20% attributed the hiring specifically to AI projects requiring specialized expertise they lack internally. Nearly as many companies (19%) said that changing labor laws and tightening immigration policies were behind their increase in contractor hiring. Another 17% pointed to the need for better access to specialized skills, and 15% cited the flexibility contractors enable. 

Notably, nearly 4 in 5 leaders (78%) expect this freelance hiring boom to be temporary, believing AI will reduce their reliance on flexible talent within two years. But for now, the ever-increasing pace of AI adoption means the contract workforce has become indispensable. 

The compliance wake-up call that companies are ignoring

The scale and pace of contractor hiring is creating new problems. 

As companies ramp up hiring in new regions, they're discovering that every jurisdiction has its own definition of the employment relationship, its own tax withholding requirements, its own rules about benefits eligibility and worker protections for contractors. That compliance complexity is at the heart of a shocking finding: 94% of companies engaging contractors have encountered a legal, financial, or regulatory issue within the past 24 months.

The issues span geographies. More than half (55%) of companies encountered compliance challenges in their home market alone. A third faced problems when engaging contractors internationally. Six percent had to navigate complications in both domestic and international arrangements. 

Misclassification is one of the most common compliance errors companies encounter when scaling contractor hiring globally. Someone properly classified as a freelancer in one jurisdiction may legally be considered a full-time employee under another country's labor law. Getting this wrong carries real consequences: back taxes, regulatory penalties, and liability exposure. The race to deploy AI capabilities may be pushing companies to prioritize speed over compliance rigor, inadvertently breaking employment laws in the process. 

This operating reality creates a paradox. While 94% of companies have encountered compliance challenges within the past year, an equal amount (94%) say they are confident their contractor arrangements are fully compliant with all applicable laws. The confidence suggests companies are either actively tackling the problem through better processes, or they've decided the cost of compliance risk is lower than the cost of moving slowly on AI.

How flexible workforce strategies diverge across markets

The contractor hiring boom is global, but it's not uniform. The drivers differ dramatically by country, revealing how regional labor markets, immigration policy, and AI adoption strategies interact.

While AI projects requiring specialized expertise are driving 20% of the world’s increases in contractor hiring, immigration policy constraints and changing labor laws were the second-most cited reason, at just a percentage point behind. For many companies, these two factors are converging: companies are racing to build AI capabilities urgently and need specialized talent, but tightening immigration policies and labor regulations in their respective countries make it increasingly difficult to hire permanent staff. This leaves contractors as the fastest and most flexible path to the expertise they need at the moment. 

Here's how different countries are approaching the contractor boom: 

Singapore leads contractor hiring, but not because of AI. Singaporean companies reported the highest increase in contractor hiring globally, with 97% saying they have ramped up reliance on freelance talent. More than a third (36%) said this increase was significant. Yet only 21% of companies pointed to AI projects as their primary reason. Instead, the number one factor driving Singaporean companies, cited by 26%, was the nation’s changing labor laws and tightening immigration policies. From January 2025, Singapore raised Employment Pass salary requirements and shifted to a more selective, quality-over-quantity approach to foreign workforce approvals. These changes have made traditional permanent hiring increasingly difficult, leaving contractors as the pragmatic alternative for companies needing flexible capacity across all project types.

Mature economies show that contractors solve multiple imperatives simultaneously. The UK, US, and Germany all increased contractor hiring at near-universal rates (94%, 93%, and 88% respectively), matching or nearly matching the global average. While these markets cite labor market constraints and immigration policy tightening as drivers, they're simultaneously pursuing aggressive AI transformation. Both factors are cited relatively evenly across these markets. This suggests contractors aren't either/or: they're not hired just for AI, or just to fill labor gaps. Instead, they’re solving both needs at once: providing the flexible capacity to navigate immigration restrictions while simultaneously building the specialized expertise that AI transformation demands.

Netherlands is the cautious outlier. Despite having the highest proportion of companies citing AI as their driver (27%), the Netherlands has the lowest overall contractor hiring increase at 79%. This suggests Dutch companies are being more selective and strategic about contractor hiring for AI, prioritizing quality and compliance over scale.

What this boom means for contract talent

The surge in contractor hiring represents unprecedented opportunity for specialized talent, particularly those with AI expertise. With 91% of companies increasing contractor hiring and 20% explicitly citing AI projects as their driver, the demand for specialized experts has never been higher. Individuals with knowledge in machine learning, data engineering, AI infrastructure, or related fields are in an extraordinarily strong negotiating position. They can command a premium, choose their projects, and work across multiple companies simultaneously. 

Yet this boom comes with unexpected complications for the people powering it. Behind the 94% of companies encountering compliance issues are an unknown number of contractors facing those problems firsthand. Misclassification risks, changing tax withholding requirements, and shifting employment law definitions create real operational and financial friction for the people involved. Contractors may find themselves reclassified retroactively as employees, suddenly owing back taxes or facing liabilities. Additionally, 96% of companies in Remote’s survey say they are auditing contractor classification, which increases scrutiny and creates potential retroactive consequences for contractors who were engaged under assumptions that no longer hold. 

The contractor boom is sustainable only if the infrastructure to support it is there. Companies are building the future of AI with freelance talent while simultaneously operating in a compliance gray zone. As contractor hiring accelerates, pressures will mount: Regulators will scrutinize more closely. Contractors will demand better terms and protection. Competition for top contract talent will increase.

The companies getting ahead are those investing in proper contractor infrastructure and clear compliance practices. This means treating contractor management as seriously as the transformation it's enabling. 

The flexible workforce is powering transformation today. What comes next depends on whether companies build the infrastructure to sustain it.