What does subcontractor mean?
Subcontracting refers to the practice of bringing in an outside company or individual to perform specific parts of a contract or project. In most cases, a company subcontracts another business to perform a task that cannot be handled internally.
What is the role of a subcontractor?
A subcontractor (or sub-contractor) is a company or person whom a general contractor, prime contractor or main contractor hires to perform a specific task as part of an overall project and normally pays for services provided to the project. One hires subcontractors either to reduce costs or to mitigate project risks.
Can subcontractors subcontract work?
Subcontractors can hire other subcontractors, but it might violate the terms of the general contracting agreement and create additional exposure for you– if you’re running the job. So, be sure to carefully review the subcontractor employment contract.
How does a subcontractor get paid?
For example, some subcontractors simply keep track of how many hours they work and are then paid weekly or biweekly. They may also be paid in installments. For example, if a contractor is working on a large job, the customer or employer may pay in four equal installments over the course of the job.
What do you need to subcontract?
Steps to Become a Subcontractor
- Step 1: Gain Skills in Construction.
- Step 2: Become Licensed.
- Step 3: Learn State and Federal Tax Regulations.
- Step 4: Obtain Insurance.
- Step 5: Devise a Contract Agreement.
- Step 6: Pursue a Bachelor’s Degree.
What is subcontractor risk?
There are a few major categories of risks faced by all subcontractors, regardless of their field. These are: financial risks such as credit, payment, cash flow and insurance; political/regulatory risks, such as employment, lien and contract law risks, as well as regulatory and administrative law risks; and.
What is the downside to subcontracting?
Subcontracting can be a productive and mutually beneficial business arrangement….Pros and Cons of Using Subcontractors.
| Pros | Cons | |
|---|---|---|
| Cost | No need to pay taxes and benefits | Payment per hour is higher |
| Commitment | Fewer legal obligations | Less commitment to you on their part, which may negatively affect the quality of their work |