Many people use the terms “temporary worker” and “contract worker” interchangeably. While each type of worker helps fill important gaps in the workforce and accommodates for increases in labor demand, there are distinct differences between the two. Understanding what sets each type of worker apart is critical as you seek to retain their services. Of course, there are also differences that affect how you manage and pay these workers.
Let’s take a look.
Temporary Worker vs. Independent Contractor
A temporary worker comes to your business through a temporary workers agency. Therefore, temporary workers are employees of the agency. You retain their services for a specified period of time (e.g., to fill in for an employee’s maternity leave) or for a specific project (e.g., you’re rebuilding after a hurricane and need extra laborers).
You pay the agency, and the agency then pays the temporary workers. Your company does not need to provide benefits to these workers; this is the responsibility of the temporary workers agency. As employees of the agency, the temporary workers get W-2s, fill out time sheets, and can get overtime pay -- all from the agency itself.
An independent contractor, or contract worker, is someone with whom your company engages for a specific project or for a series of projects. For example, you may contract an electrician to run the wiring for a new building. This person is not an employee and will be paid upon completion of the project.
Contract workers do not fill out time sheets and they do not receive a W-2. They do receive a Form 1099, and they are responsible for calculating and paying their own taxes.
It is critical that you do not wrongly classify an employee of your company as an independent contractor. This can land you in legal and tax trouble.
Do you have more questions about the difference between a temporary worker vs. independent contractor? Let us know: we’re happy to give you the answers you need!