How to Hire Temporary Workers: 7 Best Practices for Employers
Hiring temporary workers starts with one decision: put them on your own payroll, or bring them in through a staffing agency that employs them and bills you by the hour. Either way, define the role and its end date, agree costs and terms in writing, screen for the skills you need, train for safety and check every hour you're billed.
US temporary help services firms had about 2.5 million jobs on their payrolls in July 2026, seasonally adjusted (Bureau of Labor Statistics). This guide covers when temps make sense, the ways to hire them, seven best practices, costs, temp-to-hire, and who is responsible for pay, taxes and safety.
When to hire temporary workers
Temporary workers fit work with a clear end, or a need you can't size yet:
- Seasonal demand. Holiday retail, tax season at an accounting firm, move-in week on campus.
- Rapid growth. Temps cover new volume while you decide how many permanent roles you need.
- Vacancies. A temp covers a resignation while you recruit, or an employee's parental or medical leave.
- Specialized need. A project needs a skill you don't keep on staff, such as a systems migration.
- A trial before hiring. Temp-to-hire lets you see someone's work before you make a permanent offer.
Temps are the wrong tool for permanent work that is central to the business. An assignment with no planned end can run for years at agency rates. And the more a business directs an agency worker's day, the more of an employer's legal duties it may share.
Ways to hire temporary workers
A temporary worker is someone hired for a limited period or a defined piece of work, rather than for an open-ended job. Temporary workers can be on your payroll for a fixed term, employed by a staffing agency and assigned to you, or self-employed. Each arrangement puts the employer's duties in a different place.
| Arrangement | Who employs and pays the worker | Best for | Watch for |
|---|---|---|---|
| Direct temporary employee | You, for a set term or season | Seasonal roles you fill every year; leave cover | Every employer duty is yours |
| Agency temp | The staffing agency, which bills you by the hour | Quick starts; short or uncertain needs; high volume | The markup, and how much you direct the worker |
| Temp-to-hire | The agency during a trial period, then you | Roles you expect to make permanent | Conversion fees and minimum hours |
| Payrolled worker | An agency or payroll provider, for a worker you recruited | People you found but want employed by a third party | A fee that charges for recruiting you did yourself |
| Independent contractor | No one: the worker is self-employed and invoices you | A defined result from someone in business for themselves | Classification |
| Statement-of-work (SOW) firm | The consulting or service firm | A project with defined deliverables | Hourly billing for work that could be priced by deliverable |
Part-time describes hours, not duration. A part-time employee can be permanent, and a temp can work full time. Temporary staffing is a services purchase, so the scope, rates and service levels in the contract matter most.
Hiring temporary employees directly vs. through a staffing agency
Hiring temporary employees directly avoids the agency's markup, but every employer duty falls on you. A staffing agency recruits, employs and pays the worker, and charges for that in the bill rate.
| Hire directly | Use a staffing agency | |
|---|---|---|
| Employer of record | You | The agency. You can also be a joint employer for some purposes |
| Recruiting and screening | You | The agency, against the requirements you set |
| Payroll and tax withholding | You | The agency |
| Form I-9 | You. Section 2 is due within 3 business days of the first day of paid work, or by the first day if the job lasts less than 3 business days | The agency, not you |
| Safety training | You | Shared, for example general training from the agency and site-specific training from you |
| What you pay | Wages plus your own employer costs | An hourly bill rate: the pay rate plus the agency's markup |
| Time to start | Your normal hiring time | Often faster, from the agency's pool of screened candidates |
| Hiring the worker permanently | Change the terms of employment | Under the agency contract, often with a conversion fee |
When you need people this week, start with an agency. For roles you fill every season, recruiting directly and inviting the same people back can work better.
7 best practices for hiring temporary workers
The seven best practices for hiring temporary workers, whether directly or through an agency:
- Define the role, the hours and the end date.
- Choose the right arrangement for each role.
- Put the agency's terms in writing.
- Screen for the skills the job needs, the same way for everyone.
- Onboard quickly and train for safety.
- Approve hours and check invoices against the rate card.
- Make temporary workers part of the team, and keep the lines clear.
1. Define the role, the hours and the end date
Write the request as you would for a permanent hire: duties, skills and certifications, hours, location, supervisor, start date and expected end date. State that the job is temporary. An agency can only match people to what you tell it.
The end date matters as much as the start date. Without one, an assignment can run on at agency rates long after the need has passed. Set a review date for every assignment, then extend it, end it or turn it into a permanent role.
2. Choose the right arrangement for each role
Hire directly for roles you fill every season. Use an agency for speed or uncertain needs, and temp-to-hire when you expect to keep the person. Engage a contractor only when the person is in business for themselves.
Classification needs the most care. If you will set the hours and direct how the work is done, the person looks like an employee, on your payroll or an agency's. The legal section below sums up the IRS and Department of Labor tests, and your HR and legal advisers make the final call.
3. Put the agency's terms in writing
Agree these terms with every staffing agency before the first worker starts:
- Rate card by job category, showing the pay rate and the markup separately.
- Premiums: how overtime, holiday and shift hours are billed, including the markup on the premium.
- Rate changes during an assignment, and the notice you get.
- Conversion and placement fees, and the hours or weeks after which no fee applies.
- Screening (background, drug, skills and license checks) and who pays for it.
- Insurance, liability and confidentiality, including the agency's workers' compensation coverage.
- Disability accommodations. EEOC guidance says a staffing firm and its clients "may, through a contract, allocate responsibility for providing reasonable accommodations in any way they choose" (EEOC, 2000). The contract doesn't change either party's duties under the Americans with Disabilities Act.
- Timesheets and invoices that show each worker, week, hours and rate.
- Ending an assignment: notice, and what you pay if a worker doesn't work out in the first days.
If you buy from several agencies, put their rate cards side by side. The same role can cost very different amounts in different departments.
4. Screen for the skills the job needs, the same way for everyone
Ask the agency to screen against your stated requirements, then interview finalists yourself where communication or judgment matters. For direct hires, use the same steps as for permanent staff.
Apply the same criteria to every candidate. EEOC guidance says a staffing firm "must hire and make job assignments in a non-discriminatory manner". The client "is liable if it sets discriminatory criteria for the assignment of workers" (EEOC, 1997).
Never ask an agency to send or screen out workers because of race, sex, age or another protected characteristic.
5. Onboard quickly and train for safety
Prepare the first day before the worker arrives: system access, equipment, a named supervisor and a one-page guide to the job and the site rules. Pair each new temp with an experienced colleague for the first shifts.
Safety training isn't optional. OSHA says staffing agencies and host employers "are jointly responsible for maintaining a safe work environment for temporary workers". Agencies "might provide general safety and health training", while host employers train on their own equipment and hazards.
OSHA adds: "Host employers must treat temporary workers like any other workers in terms of training and safety and health protections" (OSHA). Agree in the contract which training each side provides.
6. Approve hours and check invoices against the rate card
Approve timesheets every week. Check that each invoice line matches the approved hours, the rate for that job category and the agreed overtime terms. Look for rate increases mid-assignment, premiums billed at the wrong multiplier and workers billed after an assignment ended.
Keep a list of active assignments by start date. The list shows which temps have become long-term staff in all but name. For past invoices, a contract compliance audit checks whether the agencies billed what the contract says, such as the agreed rates and overtime multipliers, and recovers the gap as credits or refunds.
7. Make temporary workers part of the team, and keep the lines clear
Treat temporary workers as colleagues. Introduce them, explain how their work fits, include them in team briefings and thank them for good work.
Leave the employer's role with the agency. Route pay changes, time off and discipline through the agency rather than handling them yourself. Who hires and fires, controls schedules, sets pay and keeps records is what the Department of Labor's proposed joint-employer test looks at. Keeping those decisions with the agency doesn't remove the duties you share anyway, such as safety training and equal treatment (see the legal section below).
What temporary workers cost: pay rate, markup and bill rate
An agency temp costs the bill rate, the hourly price the agency charges you. The bill rate is the worker's pay rate plus the agency's markup. The markup covers:
- Employer payroll taxes. The employer pays 6.2% of wages for Social Security and 1.45% for Medicare. Only the Social Security tax has a wage base limit (IRS Topic 751, reviewed September 24, 2026). Employers also pay unemployment tax.
- Workers' compensation insurance, which varies by state and job risk.
- Benefits the agency provides.
- Recruiting, screening and payroll, plus the agency's overhead and margin.
Taxes and insurance follow from the law and the job. Recruiting, overhead and margin are where negotiation happens. With only a bill rate, you can't tell how much of each hour is margin, so ask for a rate card that shows the markup.
Markups vary by job category, location, volume and recruiting effort, so compare the same role in the same market. Larger programs sometimes add a managed service provider (MSP) to run the agencies. MSP fees are usually charged on spend, to you, to the agencies or to both. When the agencies pay, the fee often comes back to you in their bill rates.
How the temp-to-hire process works
Temp-to-hire, also called temp-to-perm, is an arrangement in which a business tries a worker on assignment before offering a permanent job. The worker starts as the staffing agency's employee. The temp-to-hire process usually runs in five steps:
- Tell the agency the job may become permanent, so it recruits people who want permanent work, at a pay rate close to your offer.
- The worker starts as the agency's employee at the agreed bill rate.
- You review the work during the trial period set in the contract.
- You make an offer under the contract's conversion terms.
- The worker joins your payroll. You complete Form I-9, with Section 2 due within 3 business days of the first day of work for pay (USCIS). You also set up tax withholding and benefits.
Agree the conversion terms before the assignment starts: the minimum hours or weeks before you can hire without a fee, and the fee for hiring earlier. A fee that falls as hours are worked is easier to plan around than a flat one. Some agreements restrict hiring agency workers at all, so check yours.
Direct-hire placement is different. The agency recruits a permanent employee for a one-time fee, and the worker never works as a temp.
Legal responsibilities when you hire temporary workers
Employer duties for temporary workers come from several federal laws, and state and local laws add their own. The summary below is general information about US federal rules, not legal advice, so ask your HR and legal advisers how the rules apply to you.
With a direct temporary hire, you carry every employer duty. With an agency temp, the agency is the employer of record, but several duties are shared.
| Topic | What federal law and agency guidance say | With agency temps |
|---|---|---|
| Overtime | Unless exempt, covered employees get at least one and a half times their regular rate for hours over 40 in a workweek (DOL) | The agency pays. A client that is a joint employer shares liability for unpaid wages |
| Tax withholding | Employers generally withhold income tax, Social Security and Medicare from employees' wages, and they pay the employer's share and unemployment tax. Generally, a business doesn't have to withhold or pay any taxes on payments to independent contractors (IRS) | The agency, which pays the worker |
| Form I-9 | The employer completes Section 2 within 3 business days of the first day of work for pay (USCIS), or no later than the first day if the job lasts less than 3 business days (USCIS Handbook M-274) | The agency. USCIS tells businesses not to complete Form I-9 for people employed by temporary agencies who provide labor to them (USCIS Handbook M-274) |
| Equal employment opportunity | Staffing firm workers are covered "in the great majority of circumstances". Staffing firms must assign workers without discrimination. Clients are liable for discriminatory criteria and must treat agency workers without discrimination (EEOC, 1997) | Both the agency and you |
| Safety and health | The staffing agency and the host employer are joint employers and share responsibility for a safe workplace. In OSHA's example, the agency gives general training and the host employer site-specific training (OSHA) | Shared |
| Disability accommodation | A contract can allocate who provides accommodations, but it doesn't change either party's duties under the ADA (EEOC, 2000) | Both. The contract can say which of you provides it |
When a client becomes a joint employer
A joint employer shares the legal duties of the worker's employer, including pay. In the Department of Labor's words, under the Fair Labor Standards Act (FLSA) "joint employers are jointly and severally liable for any wages, damages, and penalties owed to the employee(s)" (91 FR 21878, April 23, 2026).
Control is the main question, though the tests vary by law and by court. In an example in the EEOC's guidance, the client supplies the work space, equipment and supplies. It also has the right to control the details of the work, make or change assignments and end the relationship, so it is an employer of the worker (EEOC, 1997).
The Department of Labor says it has provided no regulatory guidance on FLSA joint employment since 2021. Its April 2026 proposal would weigh four factors: whether the business hires or fires, controls schedules or working conditions to a substantial degree, sets pay, and keeps employment records.
Two of the proposal's examples involve staffing agencies. A packaging company that closely supervises agency workers and controls their schedules is a joint employer. Another is not, because its agency alone sets each worker's pay and schedule. No final rule had been published as of November 1, 2026.
Employees or independent contractors
Calling someone a contractor doesn't make them one. The IRS starts from a general rule (IRS, reviewed October 11, 2026). A worker is an independent contractor if the business has the right to direct only the result of the work, not what will be done or how. The IRS weighs three kinds of evidence:
- Behavioral control: whether the business controls what the worker does and how.
- Financial control: how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies.
- Type of relationship: contracts, employee-type benefits, whether the relationship will continue, and whether the work is a key part of the business.
A business that classifies an employee as an independent contractor without a reasonable basis "may be held liable for employment taxes for that worker". Either the business or the worker can file Form SS-8 to have the IRS determine the worker's status (IRS, reviewed May 19, 2026).
Under the FLSA, the Department of Labor applies an "economic reality" test. The test asks whether a worker is in business for themselves or economically dependent on an employer for work. The current rule, 29 CFR part 795, dates from 2024. Since May 2025 the Department hasn't applied it in its own investigations, but it says the rule remains in effect for private lawsuits (Field Assistance Bulletin 2025-1). A February 2026 proposal would replace it with the analysis from the Department's January 2021 rule, with a few changes (91 FR 9932). No final rule had been published as of November 1, 2026.
State tests can differ. California's ABC test, as that proposal describes it, presumes a worker is an employee unless the business shows three things. One of them is that the work is outside the business's usual course of business.
Common questions
What is a temporary employee?
A temporary employee is a worker hired for a limited period or a specific project rather than for an open-ended job. A temporary employee can be on the business's own payroll for a fixed term, or employed by a staffing agency and assigned to the business. OSHA uses "temporary workers" for workers "supplied to a host employer and paid by a staffing agency, whether or not the job is actually temporary."
Can I hire a temporary employee directly?
A business can hire a temporary employee directly onto its own payroll for a fixed term or a season. Hiring directly avoids the agency markup. The business then recruits the worker, runs payroll and tax withholding, completes Form I-9 and pays any overtime due. Hiring an agency's temp during an assignment usually falls under the agency contract's conversion terms.
Do temporary workers get overtime?
Temporary workers who are employees are covered by the same overtime rules as other employees. Under the Fair Labor Standards Act, covered employees who aren't exempt must get at least one and a half times their regular rate for hours over 40 in a workweek. For agency temps, the agency pays, and a client that is a joint employer shares liability for unpaid wages.
What is a staffing agency markup?
A staffing agency markup is the amount an agency adds to a worker's pay rate to reach the bill rate the client pays. The markup covers the employer's payroll taxes, workers' compensation and other insurance, any benefits, recruiting, and the agency's overhead and margin. Markups vary by job category, location and volume, so compare them for the same role in the same market.
What should employers look for in a temp-to-hire staffing agency?
A good temp-to-hire staffing agency recruits people who want permanent work and puts its conversion terms in writing before the first assignment. The agency should also report its fill rates and how long its placements last. Ask how it sets pay rates, so a worker's temporary pay is close to what you will offer on conversion.
Managing temporary staffing as a spend category
Temporary staffing is often bought department by department, each manager using an agency they know on that agency's terms. As the spend grows, the same role costs different amounts in different departments, markups go unchecked and assignments run on. The fixes are procurement fixes:
- See the whole spend. Pull staffing invoices by agency, department and job category. A spend analysis maps that spend to contracts and compares prices supplier by supplier.
- Fewer agencies. Consolidate spend with a small panel of preferred agencies, tiered by job family.
- Rate cards that show the markup, by job category and location.
- Benchmarks. Benchmark markups and fees for the same roles, and renegotiate with the agencies you keep.
- The right program model. Manage agencies in-house or through an MSP, compared on total cost. A competitive bid sets the terms for the whole panel.
- Invoice checks against the rate card, approved hours and agreed multipliers.
- Supplier measures such as fill rate and time to fill, reviewed alongside price.
Temps in office, IT or facilities roles are indirect spend, while cost accounting counts contract workers on a production line as direct labor (direct vs. indirect procurement). Our higher education procurement guide shows a common case. A university with one payrolling provider and many agencies weighs an MSP's fee against agency markups and the work of managing many suppliers.
Dryden Group is a procurement consulting firm, not a staffing agency or an MSP. For contingent labor, we benchmark bill rates, markups and MSP fees, check staffing invoices against the rate cards, and run the bid for staffing suppliers or an MSP. Worker classification is a question for your HR and legal advisers, and we don't advise on it.
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