I have found that employing people and paying them decent wages works well, i've pratted about with cheap labour and it ain't worth the hassle.
I also employ on a self employed basis so that when they work they get paid and only when they work!
I work out bonus schemes as icentives to get work done on time, i also pay bonus's for holidays off.
I have found that in our game time is money and you need to make them want to work hard for you, and that way is paying a decent bonus.
It has worked well for me but sometimes people do try to take the mick but that just comes with employing people, just try to keep it to a minimum, pay the decent people well and weed out the crap!!