If they are actually employees, you have to pay payroll taxes on their income no matter how little they earn. The income tax withholding is determined by their W-4 and by tax withholding tables published by the IRS. May I suggest that you engage a payroll services company to help you before you get yourself in trouble.

There are employee rules that are strictly enforced. One way to find out is to agree to pay an employee off the books and not do any withholding. Then make the employee mad, turn you into the feds, and then the real fun starts.

The rules for deciding who in your employ are hourly, who may be professional and work for a salary, and who are working under a contract are complicated and definitely are worthy of a CPA or other hour-wage expert.

So, it pays to do this correctly the first time.

Absolutely agree with the above answers. I also recommend checking out the IRS website. They have a number of handy guides that make this sort of thing a bit easier. (I generally love the IRS website. We became good friends in law school and there's a lot of good educational material there.)