Temporary employees meet short-term business needs in similar ways to contract workers. Yet how you pay a temporary employee differs in noticeable ways.
Use W-2 forms if your business is responsible for paying temporary employees.
Make sure that you understand all of the additional temporary employee prerequisites to correctly classify and pay each of your workers.
Temporary Employees
You may hire some temporary workers as your employees, but others can be employees of a staffing agency. Temporary workers:
- Perform their duties either at-will or they work for you under a contract
- Are paid hourly wages or, at times, a predetermined salary
- Work seasonally, full time, or part time
In 2025, IBIS World reported that temporary employees were estimated to reach 2.5 million people. The figure represented a 5.1% decline in temporary labor work from 2024. If you do employ these workers, confirm whether you or the staffing firm must pay the workers. Verify timesheets, run payroll, file payroll taxes, and send W-2 forms if it is your responsibility.
Independent Contractors
These workers are their own business entity. Make sure that you:
- Classify a worker as a sole proprietor or a limited liability company (LLC) when you report payments to them
- Send a Form 1099-NEC to any contractor that you paid $600 or more for services in the previous year
People Also Ask
- Which tax form should you use for temporary employees? – The only reason why you would provide a temporary worker with a 1099 form is if that worker was independent from any agency and was self-employed.
- What happens if you file a W-2 late and how can you avoid it? – You may encounter W-2 late filing penalty fees, but you can better avoid those as a business filer when you follow certain steps like utilizing automated payroll software or reconciling payroll on a quarterly basis.
We manage the payroll process with our easy-to-use AMS Payroll software for those who need to learn how to pay temporary employees. Discover our “live” and after-the-fact payroll features by downloading our free 1099-etc Demo software or by calling (405) 340-0697 with any of your questions.