Temporary employees are typically hired through an agency. The agency will be responsible for paying, supervising, withholding taxes, paying employer taxes and providing workers' compensation coverage and perhaps offering benefits to the workers. If you hire temps through and agency, they will be employees of the agency and not your company.
Agency temps should not stay at your company for more than six months. Making the temporary worker feel like an employee of your company, while a nice gesture, can expose you to employment risks and liabilities you could easily avoid. To help maintain the employment relationship between the temp and the agency, coordinate as much communication as possible and any disciplinary discussions through the agency.
Agencies charge a "mark-up" on the rate paid to the temp for screening candidates, providing oversight and performing he required filings and withholdings. This is one of the drawbacks of using agency temps; they cost more. There are a few companies that will "payroll" temps that you identify and charge you a smaller mark-up. If you have someone you know you want to hire into a temporary position, ask the agency if they will "payroll" people for you.
Another important distinction to make is between exempt and non-exempt workers. Exempt means that the workers are exempt from the Fair Labor Standards Act (FLSA) which requires (among other things) payment of overtime for hours worked over 40 hours in a week or over 8 hours in a day. Non-exempt workers must receive overtime pay for time worked and must be given required breaks and meal periods.
Exempt employees are paid for doing a job regardless of how long it takes them to do it. They can work 35 hours one week and 50 hours the next and may receive the same amount of pay for both weeks.
Classification of exempt or nonexempt is based on the type of work performed. It has nothing to do with your financial ability or desire to pay overtime or the employee's willingness to work overtime for no additional pay. Non-exempt employees cannot receive "comp time" in lieu of pay for overtime worked.
There are three types of exemptions. If the employee does not qualify for one of these exemptions, the assumption will be that they are non-exempt and are eligible for overtime pay.
Workers involved in "production" activities of the company's general business operations (distinguished from "administrative" activities) will be considered non-exempt. Even though secretaries and clerical assistants perform office work, they are generally considered nonexempt.
The proper classification as exempt or non-exempt is difficult and confusing and the penalties are steep. If a current or past employee lodges a complaint with the Dept. of Labor, you may be subject to an audit on the classification of all of your employees. Errors in classification can result in back pay and liquidated damages, as well as attorney's fees and court costs. If no documentation exists, the employee is the one who determines how much overtime he or she worked. (More information can be found at Employment Standards Administration in the United States Department of Labor and/or your state's Department of Labor.)
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