(SINGAPORE) The number of employees on term contracts in Singapore has dipped for the first time in at least five years, though staffing companies say pockets of fresh contract hiring remain in sectors like finance.

Statistics released by the Ministry of Manpower on Tuesday showed that the number of residents on term contracts fell 5.5 per cent to 186,300 as at June this year, from 197,200 in June last year. Contract workers shrank to just 11.5 per cent of the total workforce - the lowest proportion since 2006, when such data was first collected.

This reversal of the steady uptrend in contract hiring comes with the economy's unusually strong rebound and the corresponding pick-up in permanent hiring, people in the staffing industry say.

But the higher contracting demand many players in the staffing industry now face also suggests that the overall dip arose from a quicker conversion of longer term contracts into permanent places that masked a continued rise in fresh contract hiring.

MOM's workforce report showed that the fall in contract hiring was mostly due to a 15.1 per cent drop in the number of long contracts (a year or more), outweighing the 2.9 per cent rise in shorter term contract hiring (which includes casual and on-call workers).

Fresh contract hiring demand is still increasing, say industry players like Kelly Services, which saw a 15 per cent increase in contract employees placed in the first half of this year compared to the same period last year. 'We believe this is due primarily to companies looking to scale up quickly again and finding it hard to source or attract talent in a newly competitive market,' said its managing director Mark Sparrow.

Similarly, recruitment services firm Randstad has seen an increase in term contracts on offer from its clients. 'Employers are still using contractors as a way to manage their headcount restrictions,' said Randstad business support executive manager Anna Clark-Hall, adding that aside from a persistent increase in low-level to middle management contract posts there has also been a minor increase in interim senior management contracts.

Adecco South-east Asia regional director Lynne Ng said that converting contract posts to permanent ones is common in a recovery. 'Employers are often cautious during a recovery and hire contract employees - keeping their workforce flexible and nimble. When large orders come in - or business in general picks up - they can then convert these individuals to full-time employees.'

Similarly, recruitment firm Robert Walters, one of the few to report a fall in contract hiring, saw more conversions. 'Many clients preferred to convert high performing contractors into permanent staff, as opposed to going through the whole process of recruiting externally,' said IT contracting manager Niharika Chaturvedi.

Conversions aside, the rise in contract hiring has been especially marked for skilled, finance-related positions. Robert Half, which specialises in finance and accounting recruitment, has seen contract hires of skilled finance professionals rise 50 to 80 per cent in the last 24 months.

Its Singapore managing director Tim Hird says the current post-recession increase in contract hiring is of a different nature from last year's spike. 'During the crisis, companies did not want to invest in permanent headcount from a cost perspective. Now, it's because they can't find enough suitable people and can't hire permanent staff quick enough,' he said.

Specialist recruitment firm Ambition Singapore, too, has seen contract hiring demand from the investment banking sector pick up in the second half, as 'approval for additional permanent headcount has become more difficult', managing director Paul Endacott said.

Project-based work requiring specific skills is also why it is common to see higher numbers of contract workers in the IT, telecommunications and engineering sectors too, said Adecco's Ms Ng.

But contract hiring remains a tiny fraction of the workforce overall and that of individual companies, though most BT spoke to deemed the information too sensitive to disclose.

Deloitte Singapore and South-east Asia human resource director Loh Oun Hean said less than one per cent of its staff is on contract and mainly in support functions. Similarly, Stephen Tjoa, partner, People, Performance & Culture at KPMG Singapore, said contract hires make up an 'extremely low' proportion of KPMG's headcount.

'Due to the nature of the professional services we provide, we hire largely permanent staff. This allows us to take a longer term view to training and grooming our staff and serving our clients better,' he said.

'There isn't yet a very mature professional contracting space. But with job tenures reducing across the board and companies needing to bring very specific skill sets in, we think contracting overall for Singapore will have to grow,' said Kelly Services' Mr Sparrow.