The U.S. Wants Federal Contractors to Hire More Vets. Most Are Falling Short of Targets.

Companies that do business with the U.S. government are largely failing to meet federal targets for hiring military veterans, a new analysis finds.

Among federal contractors in the S&P 500, 2.4% of new hires were veterans in 2025, less than half of the 5.1% target set by the federal government, according to a report released Wednesday by the Rand Corp., a research organization that frequently focuses on military and national security policy.

Nudged by successive U.S. administrations, employers rushed to create hiring and retention programs for former military personnel after the Sept. 11 attacks and wars in Iraq and Afghanistan. Much of the government effort has been focused on federal contractors, which are required to show they are taking steps to hire a certain share of veterans each year.

“Hiring is well below what companies are claiming they’re aspiring to and what the actual government is setting as a benchmark. Both of those are red flags,” said George Zuo, an economist at Rand and author of the report. Among other contractors, veteran hiring is higher, at 4.1%, though still below the target.

Most big American companies plus thousands of small ones sell goods and services, such as toilet paper, jet fighters and website design, to the U.S. government. The government uses its clout to mandate policies on everything from worker pay to workforce diversity practices.

Every year, the federal government also sets a target—not a quota—for veteran hiring by contractors, who must design plans to show how they intend to recruit ex-service members. Rand analyzed corporate disclosures, foundation tax records and federal contractor filings. It found that grants to veteran-related programs by corporate foundations fell from roughly 1% of annual giving in 2014 to around 0.3% in 2023.

Companies are doing little to track and report progress on hiring and retaining veteransthe report found. That is creating a disconnect between public statements of support for men and women who served in the military and the concrete programs and outcomes for veterans once they transition to the private sector, Zuo said.

Overall, veteran unemployment has fallen from near double-digit levels in 2011 to below 4% today. But employers face challenges recruiting ex-service members, said Eric Eversole, president of Hiring Our Heroes, a veteran-focused program of the U.S. Chamber of Commerce Foundation.

Corporate support for servicemembers remains strong, he said. “Companies have invested heavily and I think a lot of that has to do with what we see—servicemembers are trainable, very resilient, and they can solve problems,” he said.

The Rand report concluded that companies are disclosing less information about programs for veterans, suggesting that the programs themselves have likely shrunk. It ties that retreat to the broader decline in diversity, equity and inclusion programs since President Trump took office.

One of his first acts was an executive order that took aim at what the president called “illegal discrimination” in the workplace, referring to initiatives that incorporated preferences for workers from particular groups, such as mentorship programs for women. The order specifically exempted programs with preferences for U.S. military veterans.

Meanwhile, the Office of Federal Contract Compliance Programs, the government agency tasked with overseeing federal contractors, has been shrunk significantly in the last two years and the White House has proposed eliminating it entirely. It isn’t conducting audits or reviews of veteran hiring, a change from the first Trump administration, said David Cohen, co-founder of the Institute for Workplace Equality, a trade association for federal contractors.

The Rand report was sponsored by American Corporate Partners, an organization that matches military veterans working at large employers with mentors inside those companies. It was founded by former investment banker Sid Goodfriend, whose office was a block away from the World Trade Center. On the morning of Sept. 11, he saw the second airplane hit the South Tower.

“Every multinational corporation with assets and people around the globe should be supportive of the military community,” he said.

Write to Lauren Weber at Lauren.Weber@wsj.com