Subcontracting involves hiring a person or company to help you get a project done. Subcontractors, or Independent Contractors, are not considered to be your direct employees. Instead they are hired to do “outsourced” work with your approval. General contractors usually need help to complete your project work. This often includes hiring other subcontractors, who can in addition, hire more subcontractors. As many persons or companies necessary to get the job done can be hired. The responsibility for all involved and the work they do is your general contractor’s.
Often you can ask for project bids. Review them and select your contractor. When you do, you need to draw up and sign a contract. Here are some points the contract usually includes, at the minimum:
- What will be done and when will it be finished (scope of work and deadline in business terms)?
- How much the costs are and when or how are they to be paid?
- Who pays for cost overruns?
- A liability section that proves you are not responsible for the subcontractor’s, their other subcontractors’ or employees’ actions or mistakes.
- Approved dispute-settlement and or damage payment procedures if something goes wrong.
Subcontractors then sign contracts with the contractor that usually include the terms of agreement you have with your contractor. But performance and payment are not your responsibility. Be aware though that your contractor needs to pay his people so he or she will expect you to pay on schedule.
A common example of subcontracting is for building a new house. You will need approvals, an architect, carpenters, cement workers, electricians, plumbers, plasterers and so on. You hire your contractor to find, negotiate price and supervise them.
Most people hire a contractor for the following reasons:
- They do not have, or have the persons required, to get the project done.
- To save on overhead costs such as labor, materials and taxes.
- To limit liability.
- To get the job done quickly.
Traditionally the construction and civil engineering sectors used the most subcontractors. Now this has expanded to all aspects of business and the high tech sector as well.