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  • Working with Temporary and Contract Employees

    Game Plan

    In-Depth

    What to Pay Temps and Contract Workers

    Whether you have temporary employees or use contractors who are in business for themselves, they are all an extension of your permanent workforce. As such, consider the same factors to help you decide what to pay your permanent workers.

    What Should You Pay?
    Hourly pay rates vary considerably, depending on the job. One report found temporary positions as human resources professionals, computer programmers and operations managers paid from $26 to $46 per hour. Some temporary executives and physicians earn more than $100 per hour. Meanwhile, temporary construction laborers make about $14 per hour, while customer service reps earn a few cents more.

    Of course, pay may also vary by geography, with regions with higher costs of living resulting in greater hourly pay. If you’re using an agency, they’ll likely have set the pay parameters for you, or give you a range of talent for a range of prices.

    When determining an appropriate pay rate for temporary and contract workers, ask:

    • How difficult are your open positions to fill? As with anything in business, greater demand or tighter supply means you’ll pay more. So will specialized experience and top-notch expertise.
    • What do your competitors pay? While it may be difficult to determine, over time you may gain a sense of what your competitors are willing to pay. If they pay more, they’ll be likely to get the best talent.
    • Do you prefer temporary employees or independent contractors? When you hire temps directly, you must pay their Social Security, workers’ compensation and other federal and local taxes. Some states also require that companies pay unemployment insurance taxes on temps. Others states may not because they disqualify workers who accept a job with an ending date. Contract workers are typically in business for themselves and are responsible for paying their own taxes. Because of this, contractors may charge more than temporary workers. If you pay contract workers by the hour, make sure they document their hours worked.
    • Are you weighing all your costs? Most temporary workers receive no fringe benefits, such as health insurance and a retirement plan. Some temporary agencies, however, offer these benefits for long-term temps. Additionally, agencies usually pay unemployment taxes. Consider all of your savings when you need to make a quick hire for a difficult-to-fill position. While a contractor may cost you more than other types of temporary workers, you could save if you don’t use a temporary agency and pay their markups. You also save by not having to pay unemployment, Social Security and other taxes on the contractor.
    • Do you regularly hire temps long-term? If so, you may be understaffed. Consider hiring additional regular workers. If you want to make a permanent offer to a temp you’re currently using through an agency, you may have to pay an additional fee to the agency.
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    Game Plan

    The Small Business Administration explains the difference between a temporary employee and contract worker, while providing other pointers about hiring temps here.