Temporary Employee Rules – What You Need to Know Before Hiring Temporary Employees

Does your company need someone with a specific skill set to take on a short-term project? Do you have an employee who is taking a brief leave from their job? Are you hesitant to hire new employees for permanent positions? In any of these cases, hiring temporary employees (independent contractors)  may be the best choice. 

Before you submit the job offer, it's essential to know what hiring a temporary employee entails. You'll need to be aware of certain factors like what exactly constitutes a temporary employee, how long you can have a temporary employee work for you, and what rules for temporary employees you'll need to adhere to, including the temporary employees’ 1000 hour rule. 

Let’s review all of these factors, so you can know for sure whether hiring temporary employees is the right decision, and how to go about doing so.

What is a temporary employee?

The United States Department of Law (DOL) defines a temporary or ‘temp’ employee as one who is hired to work for one year or less with a specific end date. This end date can be the day when the project the employee was hired to work on is complete, or when the permanent employee they are substituting for returns from their leave.

Why hire a temporary employee?

While hiring temporary employees might seem risky, there are many advantages they can bring to the table. Temporary employees can aid the permanent workers you already know and trust, by taking on smaller tasks to help lighten their workload. This helps your regular employees maintain the energy needed to focus on more arduous tasks. 

Hiring temporary employees is also an effective way to find candidates who might be an excellent fit for your company in the long-term. You can witness their expertise and skills firsthand and decide later if you’d like to hire them permanently. 

Even the hiring process itself is often easier when it comes to temporary employees. Temp agencies have plenty of resumes on hand and can help you find the best applicants in a short period of time.

What are the disadvantages of hiring a temporary employee?

While temporary employees may help companies run more efficiently and for a lower cost, it does have some negative aspects too, and it may not be the right decision for every business. 

It takes time for any employee to adjust to their new environment and become familiar with each workplace’s rules and regulations. However, a temp employee will not have much time to do so. This can result in more mistakes, miscommunication, and can negatively affect their relationships with permanent employees. It can also increase the risk of on-site accidents. When hiring a temp employee, consider how quickly you can expect them to acclimate themselves into their new position.

How long can you employ a temporary employee?

If you are only looking for extra help for a set period of time, you will not want your temporary employees to lose their ‘temporary’ status. How long can a temporary employee be considered temporary? Referring back to the DOL’s definition of a temporary employee, a period of temporary employment should last no longer than one year and have a clearly specified end date. 

Federal law also dictates that you cannot hire the same temp employee for more than two consecutive years. However, as an employer, you have some say in the exact length of a temp employee’s term of employment. Just be aware that keeping a temp employee for longer than a year, may entitle them to benefits typically reserved for permanent employees, so plan accordingly.

How many hours can a temporary employee work?

There is no specific limit to the number of hours an employee can work in a year and be considered temporary. But, be aware that if a temp employee works enough hours, they gain access to certain benefits. The DOL’s 1000 hour rules for temporary employees states that an employee who works for 1000 hours or more in a single year is eligible to participate in your company’s retirement plan. On average, this would mean an employee is working approximately 20 hours per week or longer.

What benefits does a temporary employee receive?

Even if a temp employee does not meet the requirements of the 1000 hour rule, they are still entitled to some benefits, thanks to the labor laws temporary employees have rights under. The last thing you want is a lawsuit on your hands for failing to meet the legal requirements of employing a temp worker, so it’s important to do your homework. 

Specific temporary employee laws and the particular benefits that must be made available to temporary employees, such as social security and certain types of insurance, may vary from state to state, so you'll need to do some research on the laws in your location before hiring. 

Of course, if you would like to make a temporary position more appealing to applicants, you can offer additional benefits at your discretion, like vacation time or employee discounts. Note that if you wish to provide health insurance to a temp employee (which most companies do not do unless the Affordable Care Act requires it), you will need to discuss this with your insurance provider beforehand. In most cases, the employee must work for at least 20 hours a week to qualify.

Pro Tip: Make sure to utilize a mileage tracker or reimbursement app like Everlance to track expense and mileage.  

Now that you know the rules for hiring temporary employees, and the advantages and disadvantages, you can make hiring decisions that best meet your business needs.