But hiring temporary workers also comes with questions. How do they differ from freelancers or contractors? What are your legal responsibilities? And how can you maximize the value of short-term hires while staying compliant?
In this article, we’ll explore what defines a temporary employee, why more U.S. companies are choosing this model, and the best practices for managing these relationships effectively in a fast-changing workplace.
What are temporary workers?
A temporary worker is someone hired for a limited time to meet a short-term business need. These roles often last a few weeks or months. They typically support a team during busy periods, cover for staff on leave, or help complete a specific assignment.
You can employ temporary workers in one of two ways:
Directly by your company: Your business handles payroll, taxes, and daily supervision.
Through a staffing agency: The staffing firm manages payroll and taxes, while you direct the worker’s daily tasks. This shared structure lets you get immediate help without expanding your long-term headcount.
And, the fact is, the labor market has seen significant growth in temporary work arrangements. We all see that. Contingent workers now represent a substantial portion of the U.S. workforce. Many host employers – companies that use staffing agencies – find this model helps them quickly fill critical positions while maintaining operational flexibility.
Temporary employment is common across all industries. This includes retail, healthcare, manufacturing, and tech. Depending on your company policy, temporary employees may or may not receive benefits like paid time off or health coverage.
💡More about benefits in 1099 benefits for independent contractors: what you need to know
The key distinction: temporary employee vs. contractor
Knowing the textbook definition, it’s obvious that, in some cases, temporary work isn’t the same as freelance or independent contracting. This distinction is essential for compliance with U.S. labor laws. Let’s get into it.
A temporary employee is legally classified as an employee (of either your company or the agency) and receives a W-2 form.
An independent contractor, on the other hand, is self-employed, operates as a separate business entity, and handles their own taxes and benefits. They receive a 1099-NEC form. Independent contractors maintain significant control over how they perform their work. Unlike them, temporary workers receive direct supervision and are integrated into your company’s operations.
In short, it looks like this:
| Feature | Temporary employee (W-2) | Independent contractor / Freelancer (1099-NEC) |
| Employment relationship | Legally an employee (of company or agency). Company or agency sets schedule and directs work. | Self-employed (separate business entity). You define the outcome, but the contractor decides how and when to do the work. |
| Pay & taxes | Paid an hourly wage. Employer or agency handles payroll taxes, Social Security, and issues a W-2. | Paid per project or invoice. They handle their own self-employment taxes and receive a 1099-NEC. |
| Tools & workspace | Employer or agency provides the necessary tools, equipment, and workspace. | They supply their own resources and often work remotely. |
| Benefits & protections | May qualify for certain benefits like overtime pay, workers’ compensation, or state-mandated sick leave. | Not eligible for employee benefits or protections. |
| Type of work | Roles tied to your company’s core operations (e.g., customer service, administrative help). | Provides specialized or external services (e.g., IT consulting, design, marketing). Unlike temp workers who are integrated into daily operations, contract workers typically work on discrete projects with specific deliverables. |
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Why businesses hire temporary employees
Now, companies turn to temporary workers for many reasons. From covering short-term absences to managing seasonal peaks, this model helps you stay productive, flexible, and cost-efficient.
- Covering employee leave – ensures operations continue smoothly when permanent staff take family or medical leave.
- Managing seasonal demand – helps retailers and hospitality firms meet customer needs during busy periods like the holidays.
- Filling project-based roles – lets teams quickly expand for limited projects (e.g., product launches) and keep costs predictable.
- Bridging hiring gaps – maintains high productivity while you search for a long-term permanent hire.
- Accessing specialized skills – brings in high-level technical or creative expertise needed for a short time without a long-term commitment.
- Controlling costs – often more cost-effective than onboarding full-time employees. As an employer, you save on benefits like health insurance or paid leave.
- Testing potential hires – acts as a “trial period” for both sides to evaluate fit and performance before making a permanent offer.
The demand for temporary staffing continues to grow as businesses adapt to economic uncertainty. While permanent employees provide stability, temp partnerships let you scale your temporary workforce up or down based on demand. This approach proves particularly valuable for organizations operating in volatile markets or managing limited budgets. After all, hiring temporary employees gives you more control over costs, staffing levels, and project timelines. It helps you adapt quickly to change.
Pros & cons of hiring temporary workers
We’re sure, you already see that using temporary staff is an effective strategy. However, it does have some drawbacks that need to be considered before going all in.
Advantages of temporary workers
- Flexibility and speed: You can bring in help quickly during peaks and reduce headcount once the need passes.
- Cost-effective staffing: Temp workers are generally more affordable than permanent hires since they typically don’t receive full benefits.
- Quick results: Temporary staff can usually start contributing immediately with clear instructions. This helps you meet tight deadlines.
- Access to specialized talent: Provides short-term access to expertise that might not be needed full-time.
- Trial before hire: It’s also a great and practical way to assess a worker’s skills and fit before offering a permanent position.
Disadvantages of temporary workers
- Limited loyalty and engagement: Since the assignment has an end date, temps may feel less connected to company goals.
- Inconsistent quality: Despite screening, there’s always some uncertainty about performance until they start the job.
- Lack of continuity: When temporary workers leave, valuable knowledge and experience may go with them. This requires new training.
- Pay and benefit gaps: Temps often earn less and receive fewer benefits than permanent employees. This can affect morale. The issue of equal pay for the same work – where temps receive less pay than full time employee counterparts in similar roles – remains a concern. For example, temporary employees may earn an hourly wage without access to health insurance or retirement benefits that direct hire employees receive.
- Legal and worker classification risks: You must ensure correct classification (W-2 vs. 1099-NEC) to avoid tax penalties.
The best approach? Use temps strategically. Fill immediate needs while maintaining a strong core team of permanent employees.
Legal considerations and worker protections
As we saw, hiring temporary workers comes with important legal responsibilities. Under U.S. law, they’re entitled to many of the same protections as permanent staff.
Key employer responsibilities
- Fair wages: Temps must earn at least the federal or state minimum wage.
- Overtime pay: They must receive overtime pay for hours worked beyond 40 per week, following federal law. Some positions may be exempt from overtime requirements. But most temp workers qualify for these protections based on their job duties and salary or hourly wage structure.
- Safety: You must provide a safe and healthy environment under OSHA standards.
- Shared liability: If you use a staffing agency, your company (the “host employer”) shares responsibility for safety and compliance. This means temps must receive the same safety training and protective equipment as regular employees.
Tax reporting and benefits
Correct tax reporting is crucial. From the comparison section, we already know that temporary employees receive a W-2 form and are subject to payroll taxes.
As for the employee benefits, federal law generally specifies that temps qualify only after working at least 1,000 hours in a year. This is a threshold many in temporary employment never reach. However, certain states have stricter laws covering sick pay and disability benefits that may apply sooner. Companies should confirm requirements with their state department of labor.
Global and remote compliance
Hiring temporary workers from other countries adds layers of complexity. Each nation has its own employment and tax laws.
To simplify compliance and reduce legal risks when managing international temp teams, many companies partner with an Employer of Record (EOR) or Professional Employer Organization (PEO) service. These organizations act as local employers. They manage payroll, taxes, and benefits on your behalf.
Best practices for managing temporary employees
Managing temporary staff effectively isn’t a piece of cake. It requires clear systems, compliance, and fostering a positive work environment. Starting from, of course, proper onboarding.
1. Streamline onboarding and communication
A temporary status doesn’t mean a rushed start. Provide a clear introduction to company culture, tools, and expectations. This will help prevent future misunderstandings.
- Quick-start guide: Offer a brief guide to essential processes.
- Clear contact: Assign a single point person for questions and support.
- Regular check-ins: Brief, regular meetings help keep temps engaged, informed, and productive.
2. Use the right HR systems
Modern HR platforms (HRIS) can efficiently track contracts, hours, and payments. For international teams, a global HR platform or EOR service simplifies cross-border payroll and tax compliance. This lets you focus on performance instead of paperwork.
For collaborating with freelancers and independent contractors, Useme streamlines the entire payment process. You can manage contracts, process invoices, and ensure tax compliance – all in one platform. This is particularly valuable when working with people all over the world.
3. Partner with reliable staffing agencies
For many businesses, a temporary staffing agency is a way to fill positions. Temporary staffing agencies handle recruitment, payroll, and initial compliance. This lets business leaders focus on operations.
These agencies often maintain pools of pre-screened applicants ready to start quickly. Choose partners who refer quality workers, understand your industry, and uphold fair employment standards. Some clients establish long-term relationships with specific agencies to ensure consistency.
4. Support and recognition
Show appreciation for good performance. Include temps in team meetings when appropriate and create an inclusive environment.
When temporary workers prove to be a good fit, consider offering them opportunities for extended contracts or pathways to permanent positions. This boosts morale and helps you attract skilled talent for future projects.
5. Document everything
And finally, keep detailed records of every temporary contract. This includes job descriptions, start and end dates, pay rates, and tax details. Clear documentation reduces legal risks and ensures transparency for both sides.
Conclusion: building a stronger future with temporary workers
The rise of temporary workers reflects how modern businesses operate: fast, flexible, and focused on results. They bring valuable skills and agility. This offers you a way to stay competitive without long-term cost commitments.
Success, however, depends on more than just quick hiring.
As the nature of work evolves, the line between temporary and permanent roles continues to shift. Some workers prefer the flexibility of temporary work. They move between different companies and industries to gain diverse experience. Others use temp positions as stepping stones, hoping to find work that leads to stable, long-term employment.
Companies that manage their temporary employees thoughtfully will have a clear advantage. They’ll not only fill roles faster but also build trusted relationships with professionals who can deliver results on demand.
At Useme, we believe flexible work should benefit everyone. Whether you’re hiring temporary employees through staffing agencies or working with independent contractors and freelancers, we provide tools to simplify payments, contracts, and compliance. By understanding how to collaborate effectively and compliantly with temporary employees, your company can build a workforce that’s adaptable, resilient, and ready for the future of work.
