Using a unique panel database, we identify volatility and plant size as relevant characteristics associated with the intensive and extensive margins of using temporary agency workers (TAW). We also evaluate the effects of a regulation that increased the regulatory burden on TAW. We find a negative impact of this regulation on a plant’s total employment (2% decrease) but negligible effects on a plant’s value added and production levels. We present evidence of substitution effects. On average, plants that used TAW before the regulation increased the use of permanent workers by 1% and inventory share by 10% after the regulation.