The UK's leading contractor site. Trusted by over 100,000 monthly visitors

Hiring a temporary resource – option and issues to consider


In a previous article we discussed the financial and legal issues relating to hiring a permanent employee.

Sometimes however, you may wish to hire someone temporarily. This article addresses the issues.

Reasons for hiring a temporary resource.

You may need an extra resource for one of the following reasons:

  1. Your workload is too high and you need some help.
  2. You need a one off job completed which you cannot do yourself or perhaps do not have the time for.
  3. An existing employee is away for a short while.

If these situations are likely to be short term, it will not be economic or appropriate to take on a permanent member of staff and you may choose to look at temporary solutions.

Also, hiring temporary resources is a good risk free manner during the initial expansion phases of a business.

Hiring Options

You have four options:

  1. Use an agency
  2. Direct Temporary Employment
  3. Self Employment
  4. Use another contractor

Option 1: Use an agency

Agencies will provide staff either on a daily basis (usually for secretarial/administrative functions) or on a contract basis, which commits the agency and worker to work for a specified period to time, e.g. six months.

The rate the agency charges will include employer’s national insurance (currently 12.8%), together with their administration fee and profit margin. It will also include an element of holiday pay and costs of employment, e.g. maternity, sick pay and allowance for annual and bank holiday pay.


  • It keeps the administration down to an absolute minimum.
  • At the end of the temporary assignment you have no further obligation or liability towards either the agency or the worker.

Option 2: Direct Temporary Employment

If the worker is to be engaged on a semi permanent basis, e.g. two or three days per week, then it would be more appropriate to employ them directly through your own limited company.

This will involve registering as an employer with HMRC and administering a payroll scheme. PAYE/NIC will need to be deducted, payslips prepared and various returns made to HMRC throughout the year.

Temporary workers who are directly employed will be entitled to holiday pay, being a minimum of 20 days, including statutory/bank holidays paid on a pro rata basis and these would accumulate from the first day of employment.

Direct employees will also be entitled to maternity/paternity leave, statutory sick pay and other employment rights.

For direct employees, you will need to pay a salary in accordance with the national minimum wage.

Option 3: Self Employment

Using self employed people for temporary assignments will only be an option if you do not use an agency and do not engage the person for regular employment.

In such cases, it will be necessary for you to obtain evidence that the self employed contractor is registered with HMRC as a self employed person and keep a record of their national insurance number and address, in case of any queries by your own Inspector of Taxes.

If you are in doubt regarding the self employed status of a contractor who represents themselves as being self employed (and is therefore hoping to be paid without deduction of tax), it is very important that you seek professional advice or obtain clearance from your own Inspector of Taxes, prior to making any payments to them.

Problems can arise where an incorrect assumption is made, followed by a visit by an Inspector of Taxes who deems the worker to be employed. In such circumstances, HMRC can seek payment of the PAYE and National Insurance together with interest and penalties from you. Beware!

Option 4: Use another contractor

If your chosen contractor operates through his own limited company, then you can accept their company invoices for gross payment, without deduction of any taxes.

In addition, if they are registered for VAT, they will charge you VAT which you will be able to recover (unless you are operating the flat rate VAT scheme).

You should obtain a copy of their Certificate of Incorporation and VAT certificate and retain for further reference, in case of HMRC enquiries.

This method is a low risk solution, since it avoids all worries about employment rights and regulations, sickness pay, holidays, etc.

The rates charged are likely to be higher than any of the above options but the avoidance of all risks may make this premium a price worth paying, depending upon the circumstances of the engagement.

If you could arrange a fixed price arrangement based on agreed deliverables this will reduce your risks even further.

Published: 27 July 2007

Request a call back and SG Contractor Accounting will be in touch

SG Accounting are our chosen partner for providing a specialist accounting service to contractors. SG Accounting

© 2024 All rights reserved. Reproduction in whole or in part without permission is prohibited. Please see our copyright notice.