As population aging continues to deepen and economic pressure intensifies, flexible employment is increasingly adopted by manufacturing firms as a substitute for formal employment to reduce labor costs and cope with operational pressure during economic downturns. The impact of flexible labor costs on the performance of manufacturing firms was examined. The average wage of part-time recruitment for manufacturing positions in the city where firms are located was used as a proxy variable for flexible labor costs. It is matched with data of listed manufacturing firms to construct a firm-level panel dataset. The empirical results show that an increase in flexible labor costs has a significant negative effect on firm performance. Specifically, a 1% increase in the average wage of flexible labor in urban manufacturing is associated with a decrease of about 0.032 percentage points in return on assets. After endogeneity is addressed and a series of robustness tests are conducted, the conclusion remains valid. Mechanism analysis shows that rising flexible labor costs increase financing constraints and reduce R&D investment, which leads to a decline in firm performance. Heterogeneity analysis indicates that the negative impact is more pronounced in small firms and labor-intensive firms. It provides empirical evidence to inform firms in formulating rational employment strategies and offers policy guidance for governments to improve labor market regulations and promote high-quality development in the manufacturing sector.