I've done this quite a few times with video editors and the like. Pay should be around McDonald's rates (seriously would you rather be flipping burgers or looking at porn for $6-$8/hour) starting. If they're good you can give them raises. Tell them up front it's week to week trial and you can terminate at any time. The smart ones you can turn into money machines for you until they figure out they can make more on their own
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As far as the work-in-house rules, that's really only applicable to full time long-term contractors who are doing the same job as a salaried employee might be doing. Then you got IRS and SS to worry about.
Another rule is the $600, if you pay them more then $600 in 1 year then you're suppose to report it to social security. Check with your lawyer/CPA for all the local labor laws as well.