Businesses are relying more than ever on short-term help to meet demand, manage costs, and fill skill gaps as staffing flexibility becomes essential in today’s uncertain economic climate.
Overall, there are more than 18 million contingent workers in the U.S., and they generated $1.4 trillion in B2B spend in 2023, according to Staffing Industry Analysts (SIA) .
The contingent workforce — a pool of workers who are not on the company’s regular payroll but are hired on a temporary or project-based basis — are typically made up of temp workers or contract workers.
“Independent contractors represented the lion’s share of revenue earned with $690.6 billion in B2B spend in 2023. They were followed by temporary workers sourced directly (not through a staffing firm) at $273.0 billion,” reported SIA. “Temporary workers who did work through staffing firms took in B2B spend of $189.5 billion, according to the report.”
Although the terms temporary worker and contract worker are often used interchangeably, they describe very different employment relationships — each with its own legal implications, tax rules, and best-use scenarios. Misclassifying a worker is more than a paperwork problem; it can lead to costly fines, back taxes, and even lawsuits.
The Society for Human Resource Management says that the difference between temps and contractors comes down to how their work is structured and how they are compensated.
If you’re an employer, HR professional, or manager, understanding the distinction is key to building a compliant, efficient workforce.
Temporary workers (often called “temps”) are hired for short-term assignments that can last anywhere from a single day to several months. They may be brought on to:
Your company can hire temps directly or work with a staffing agency such as PRT Staffing.
When a staffing firm is involved, the worker is technically employed by the agency — meaning the agency handles payroll, benefits, and taxes, while you manage day-to-day supervision.
Key characteristics of temporary workers:
Contract workers — also called independent contractors, freelancers, or consultants — are self-employed. They operate as their own business, whether as a sole proprietor, LLC, or corporation, and are engaged for specific projects or deliverables.
Instead of being paid through payroll, they invoice your company for services. Employers report their earnings on a 1099-NEC if you pay them $600 or more in a year. They handle their own taxes, insurance, and tools or equipment needed for the job.
Key characteristics of contract workers:
While both can fill short-term needs, the way you engage them — and the rules you must follow — are very different. Here’s a breakdown:
|
Factor |
Temporary Worker |
Contract Worker |
|
Employment Relationship |
Employee of your company or staffing agency |
Self-employed business entity |
|
Tax Form |
W-2 |
1099-NEC |
|
Supervision |
Works under company or agency direction |
Controls how work is completed |
|
Benefits |
May receive benefits through staffing agency or employer |
Provides own benefits |
|
Duration |
Short-term assignments |
Until project completion |
|
Expenses |
Employer or agency covers tools/materials |
Worker covers own expenses |
|
Best For |
Filling shifts, seasonal spikes, covering absences |
Specialized expertise, project-based work |
Temporary worker example:
A manufacturing plant hires additional assembly line workers through PRT Staffing to meet a holiday season production surge. These employees clock in daily, follow company procedures, and work under supervisor direction until demand levels return to normal.
Contract worker example:
A company hires a freelance IT consultant to migrate its data to a new cloud system. The consultant sets their own hours, uses their own equipment, and delivers the completed project within the agreed-upon timeline.
The IRS and the U.S. Department of Labor closely monitor worker classification. Even if you and the worker agree on a title, the law may view the relationship differently based on:
Misclassifying a worker can lead to:
Here are three common pitfalls employers face when navigating temporary and contract staffing:
Navigating today’s staffing landscape is challenging, especially when demand fluctuates or specialized skills are needed quickly. PRT Staffing, with clients nationwide and branch locations in Arizona, Florida, Georgia, and New Mexico, offers:
Temporary and contract workers both help businesses stay agile and competitive. The key is to understand which arrangement best fits your needs — and to meet all legal and tax obligations.
When you partner with PRT Staffing, you gain a workforce ally who can connect you with the right talent, at the right time, under the right terms.
Contact PRT Staffing today to discuss your staffing needs and discover how we can help you build a flexible, compliant workforce.