"Oh, and when business slows down you don't have to think about redundancy payments, you just shrink your contractor workforce. No hard feelings, and thanks for all the fish."
I agree 100%. Seasonal business will be hit pretty hard. So will companies that hire in expert help for projects.
Some time ago, a friend that was the engineering manager at an aerospace company I worked for talked about forming a loose "company" to bid on technology contracts the US government puts out from time to time (SBIR and similar). The idea would be to have a minimum core group of people and a pool of engineers that would be brought in to perform the research/engineering to fulfill any contract awards. In essence, the vast majority of the workers would be outside contractors. You don't want to have to pay redundancy to a room full of rocket scientists.