Employment contracts serve as a binding document between the employee — whether temporary or permanent — and the employer, stating the type of employment as well as the conditions attached to the employment. In this way, both the employer and employee understand the terms of the employment. In the case of a temporary employment contract, the employer will state in the contract that the employee is only a limited type of worker, with a stated length of time to spend working for that particular employer. The temporary employment contract, just like any other contract, serves the very important purpose of listing all of the expectations and duties of the two parties in the contract.

In the case of a temporary employment contract, the agreement might be between the employer and the employee, or it might be between the employer and the supplier of labor, in this case, an employment agency. Most times, companies that do not want to be bothered with finding temporary employees simply contract the services of temporary employment agencies with the understanding that the employment agency will supply the company with the specific type of human capital required by the company. In this type of situation, the employment agency will supply the necessary paperwork and contracts for the employee to sign and also serve as a sort of middleman in the relationship between the employer and the employee.

For instance, the temporary employment agency will brief the employee of the duties required of the job, including the time to report to work, the type of work, the hours and the benefits. Any payments of wages to the employee will be handled by the employment agency, a process that usually involves charging the employer a significantly higher amount than what it pays to the employee. Whatever the case, the employer considers the employee supplied by the agency to be a temporary worker, and the contract between them is a temporary employment contract.

A permanent employee and a temporary employee usually have similar expectations in terms of basic remuneration and treatment. This means that the temporary employee will, in most cases, earn the same money that a permanent employee in that position would earn. The only difference would be that such an employee might not be subject to any vested interests in terms of expectations of bonuses and other types of rights that accrue to permanent employees by virtue of their longevity on the job.