The anxiety level among federal contractors is rising as the government shutdown drags into its fourth week, leaving hundreds of thousands without pay and with no guarantee they’ll be compensated for lost wages.
Unlike federal workers, who likely will receive back pay once funding is restored, most contract employees are not covered by such protections. Many are now draining their savings, applying for unemployment, or looking for temporary work as the political stalemate shows no sign of ending. The Washington Examiner spoke with several federal contractors and small-business owners who were not authorized to speak to the media and feared jeopardizing their employment if identified.
“I work full-time for a large government contracting company, and my team’s contract is with the Department of Transportation,” said a contractor based in Virginia. “We don’t have authorization to work during a shutdown, which means we cannot work and will not get paid for the duration. It’s honestly a really stressful situation, and it feels like we don’t matter as employees.”
At the National Institutes of Health, a research-support contractor said she has used all her paid time off and is now on unpaid leave with no back pay. “Unemployment doesn’t even cover my rent,” she said. “We like our work and want to return, but we need an income. Once my savings run out, I’m not sure what I’ll do.”
Even those who haven’t been furloughed are feeling the strain. One IT contractor said the shutdown has left teams stretched thin and morale low. “I haven’t been furloughed, but I’m now doing the job of four people since part of our team is no longer working,” the contractor said. “It’s a terrible work environment. I’m constantly stressed and worried I’m not doing a good job since I have so much on my plate.”
The owner of a small business that does federal contracting said this shutdown has been the most disruptive the industry has seen in more than 20 years. “We’ve been through many shutdowns before, but never one like this,” the business owner said. “In the past, even when it went 35 days, you could tell lawmakers were working toward a deal. This time, it doesn’t feel like there’s any urgency.”
The business, which provides homeland security, emergency management, and criminal justice support to federal agencies, has already been forced to furlough employees for the first time. Some contracts at the Department of Justice have stopped entirely, while others at FEMA are operating with only a fraction of their usual staff. “Work that was previously deemed mission-critical has been halted,” the owner said.
She warned that if a storm forming in the Caribbean were to make landfall, federal disaster readiness would be severely hampered. “The government isn’t ready for a disaster right now,” she said.
The shutdown has also created a wave of uncertainty among employees. Some of the firm’s workers recently had their unemployment claims denied in Virginia, leaving them with no income. “That’s catastrophic,” the owner said. “These are younger workers, often five years or less out of college, with student loans and high rents. They don’t have savings, and now they’re being told they don’t qualify for unemployment.”
Others still working feel guilty and anxious. “They’re banding together to keep the company strong, but morale is fragile,” the owner said. “We’ve already been asked by two clients if we’ll still be viable as a business if this continues through Thanksgiving. We will be, but many small companies won’t. Some could go under if this lasts another month.”
“I worry that this is going to drive talented people away from government work altogether,” the owner added. “People who want to serve are going to say, ‘I can’t do this again.’ That’s tragic, because we need smart, committed people supporting the government, not leaving it.”
James Carroll, CEO of the Professional Services Council and a former Trump administration official, said the shutdown is already creating ripple effects across every sector.
“Our member companies provide solutions to virtually every federal department and agency, representing more than a million employees nationwide,” Carroll said. “We’re hearing growing concern that the shutdown is not only affecting paychecks but threatening national security and research programs that depend on continuity.”
Carroll said many firms, from large defense and technology providers to small professional-services companies, are already reporting delayed contracts, furloughs, and reduced hours. “Companies are trying to shift people to other contracts or have them take annual leave, but we are seeing real furloughs,” he said. “These are highly skilled workers with top security clearances. If we lose them, they’re not coming back.”
He warned that the damage would linger even after funding was restored. “Every day of the shutdown translates into three to five days of lost productivity once the government reopens,” Carroll said. “If this continues, we could see smaller companies go out of business permanently.”
The Professional Services Council has been in regular contact with senior administration officials throughout the shutdown, urging a bipartisan resolution. “We’re pleading in a very nonpartisan fashion for this shutdown to end,” he said. “We’re not just talking about salaries. We’re talking about a loss of technology, a loss of companies, and a loss of mission success for the U.S. government.”
The shutdown’s ripple effects are already being felt across the Washington region, where the contractor economy is most concentrated. In Virginia, roughly 1,628 government contractor employees were laid off in 2025 due to canceled contracts, according to Federal News Network. The total likely undercounts the true number since it only includes layoffs reported under the state’s Worker Adjustment and Retraining Notification (WARN) Act, which requires companies to provide advance notice of mass layoffs.
Recent filings include Peraton with 92 employees in Reston and Home Care Delivered with 73 employees in Glen Allen. In Maryland, companies with federal ties, such as Sodexo Services East, Parsons Technical Services, and Johnson Controls, have reported layoffs affecting more than 200 workers across Fort Meade, Annapolis Junction, and Federalsburg. Gov. Wes Moore (D-MD) has estimated that Maryland is home to roughly 225,000 federal contractors, while Washington, D.C., has not seen a new WARN notice since August.
Leidos, one of the country’s largest contractors, said it is “working with federal customers to minimize disruptions.” The Virginia-based technology and defense firm confirmed that some of its projects have been paused and that “employees in several areas are being asked to work 32 hours per week to help alleviate the impacts of the shutdown.”
“Our aim in these situations always is to minimize the impact on our employees as we balance the needs and requirements of our customers,” the company said in a statement to the Washington Examiner.
Lawmakers in both parties are pushing to close the gap between federal employees and contract workers. Sens. Tina Smith (D-MN), Mark Warner (D-VA), and Tim Kaine (D-VA), along with Rep. Ayanna Pressley (D-MA), have introduced the Fair Pay for Federal Contractors Act of 2025, which would require agencies to reimburse employers for wages lost during shutdowns. The bill, backed by more than 100 House Democrats and one Republican, Rep. Brian Fitzpatrick (R-PA), revives earlier efforts that failed in 2019 and 2023.
During the record-long 2018-2019 shutdown, the Service Employees International Union estimated that more than 500,000 contract employees went without pay and were never compensated, an inequity lawmakers say this bill is designed to fix.
“This is about fairness — contract workers and their families should not miss a paycheck because of a government shutdown they did nothing to cause,” Smith said in a statement.
STATES SCRAMBLE TO ADDRESS LAPSE IN SNAP FUNDING DURING GOVERNMENT SHUTDOWN
The NIH contractor, caught in limbo without pay, pleaded with lawmakers to reach a compromise, saying real people are bearing the brunt of the stalemate. “Thousands of hardworking Americans are suffering. Many are still working without pay, and contractors will lose income we’ll never recover,” she said. “Shutdowns like this shouldn’t even be possible.”
She added that many workers are living paycheck to paycheck, saying, “Even professionals are just a few paychecks away from losing everything.
