Subcontractor Agreement vs Contractor Agreement

Completing a project in a trade can prove a massive undertaking. That one project can call for many different strands of expertise – and, for that expertise, you might not be able to tap into your own knowledge base or maybe even that of tradespeople you employ.

Imagine, for example, being tasked with remodeling a home, but not knowing how to safely take care of the electrical side of the job. In this situation, you could hire a contractor to handle that aspect on your behalf. That contractor, in turn, might hire a subcontractor to make up for gaps in their own knowledge. This can all build up into a complex web of agreements.

The world of contracting and subcontracting can certainly prove bewildering, especially when multiple contractors and subcontractors are sourced to tackle various responsibilities on the same project. Hence, it can pay for you to know how the specific types of agreements at hand can differ.

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What is a contractor’s role?

Though you might hire a contractor to carry out work for you, that contractor would not technically constitute an employee of your company. They will strike an agreement with you, but it will be for one specific job, Bizfluent emphasises. They will also be paid fully and directly by you for the job.

If you have any concerns about how the contractor will handle – or is already handling – the task assigned to them, you would raise that concern directly with the contractor. Even if a subcontractor is responsible for the issue in question, they are answerable to the contractor rather than you.

How does a subcontractor’s position differ?

In studying details of the project, the contractor might soon recognise certain tasks which they are not equipped to carry out. Therefore, the contractor could turn to subcontractors for these tasks.

Different subcontractors can handle different tasks and do not need to be employed by the contractor; they could instead be an independent worker. In any case, the subcontractor’s responsibilities for the project will be specified in a contract agreed with the contractor.

This contract will include the terms under which the subcontractor will be paid. A contract drawn up to facilitate payment from an employer to a contractor or from a contractor to a subcontractor may allow the payment to be made either in instalments or in full after the project or job is finished.

Are you considering signing a deal with a contractor?

If so, you certainly have a lot to think about – even more so than you would have gathered from reading this article so far. This is because, no matter which contractors or subcontractors are involved in a project, you are ultimately deemed responsible for that project and its success… or lack of it.

Picture the scenario of hiring a gardening contractor who, in carrying out work in your client’s garden, accidentally damages part of the property’s exposed brickwork. The client could react by taking legal action against you, as the property damage would be ultimately attributed to you.

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As blunders like this are an ever-present possibility, whether they come from a contractor, subcontractor, your own company or you directly, it’s worth taking out public liability insurance. This would assist you in making financial amends for property damage or injury besetting a third party.

The building blocks of a contractor or subcontractor agreement

The contract that you, the employer, put together with a contractor will be known as a “contract for services”, the nibusinessinfo.co.uk website notes. This term is not to be confused with “contract of service”, which refers to an employment contract between an employer and employee.

The contract for services will specify a set fee to pay the client and, usually, a set duration over which the contractor will conduct the work. The contractor could charge you on an hourly or daily basis or simply with a lump sum, with possibly part payment on reaching specified milestones.

If you are instead a contractor and looking for a subcontractor, you could choose from a broad spectrum of tradespeople or trade organisations. Subcontractors can range from individual, self-employed people to large organisations of national reach.

Contracts which you can draw up for subcontractors include task-based contracts bar any fixed date, though fixed-term contracts are also possible. To afford yourself especially rich flexibility, you could even settle on a long-term arrangement which would be possible to sever at any time.

What checks should you make before hiring?

Whether you are intent on hiring a contractor or subcontractor, you should verify that they are sufficiently skilled and knowledgeable to safely do the job without risking health and safety.

The Health and Safety Executive urges you to take account of the health and safety implications of any risks specific to the work, as the risk level will be affected by the nature of the job. You should go as far as conducting a risk assessment, the findings of which should be shared with the other party.

While there should already be a risk assessment in place for your own firm’s work activities, the contractor or subcontractor needs to assess the risks of their own work outlined in the contract. Collectively, both of you then need to consider risks that each other’s work could pose to the health and safety of the workforce or other people.

If you neglect this stage and hire a contractor or subcontractor who inconveniences a member of your staff, you might need to pay compensation. That could be funded with employer’s liability cover, which you might legally require anyway – even if you only rely on labour-only subcontractors.

You can add employer’s liability to a package of insurances from Tradesman Saver, and we will throw in public liability insurance automatically.