Temporary workers are typically hired to meet short-term business needs, such as to:

  • Assist during seasonal or busy periods.
  • Fill in for an employee who’s on maternity or sick leave.
  • Complete a specific short-term project.
  • Handle temporary increases in production orders.
  • Solve an issue requiring highly specialized skills.

You can hire temporary workers directly or through a staffing agency that provides temporary personnel services. Either way, below are three things to keep in mind.

1. Distinguish between temporary workers and contract workers.

A temporary worker is your employee only if an employment relationship exists between you both. This employment relationship status is determined by IRS common-law rules, the Fair Labor Standards Act and other statutory regulations.

If you hire temporary workers directly and no employment relationship exists, then they are independent contractors. This means they are responsible for paying their own taxes, should not be receiving employer-sponsored benefits and should have total control over how the work is done. It can be difficult to determine the difference between an independent contractor and an employee, so work with an HR professional on this.

Conversely, if you hire temporary workers through a staffing agency, then they are employees of the agency. This means the staffing agency is responsible for paying their wages, withholding and reporting their taxes, and meeting all other applicable employment obligations.

Businesses can face penalties for misclassifying independent contractors and employees. So be sure to properly classify any temporary workers you hire.

2. Assess your short- and long-term needs.

It’s not uncommon for businesses to transition temporary workers to full-time employment.
You can, for instance, do this through a “temp to hire” agreement with a staffing agency. In this case, it’s expected that you will hire the temporary worker as an employee at some point (e.g., after 90 days) if they perform satisfactorily. This “buyout” is done through the staffing agency that provided the temporary worker in the first place.

If you hire a temporary worker directly, then you can later switch their status from independent contractor to employee. For this to happen, an employment relationship must be present.

3.  Weigh the costs of hiring temporary workers.

Before you hire temporary workers, determine whether it’s more cost effective to do so on your own or through a staffing agency. Also, consider the costs of hiring them as independent contractors versus as employees.

Keep in mind that to cover their operating expenses and labor costs, staffing agencies mark up the pay rates for each worker they place with a client.

Per an article published by Newegg Staffing, “Most staffing agencies will mark up their staffing fees between 15 [and] 40%.” One survey found that for an hourly rate of $17, a staffing agency would need to charge at least $25.76 in order to make a profit.

Depending on the situation, it may or may not be worth it to do the hiring yourself.