Interested in the differences between subcontractors and contractors? Keep reading to find out what they are and how both can help your business.
As a business owner, you will probably need a contractor for a unique project or particular skill. When you hire a contractor, subcontractors might be involved with the project. So, what’s the difference between the two titles? Keep reading to find out more.
A contractor is someone who you hire for a specific good or service on a contractual basis, rather than as a full-time employee. Typical specialties of contractors include:
In addition, there are two terms to be aware of: general contractor and independent contractor. While they both have the word “contractor” in their name, they are not the same thing.
This might seem like a lot to keep track of, so here’s a breakdown:
An independent contractor can be in the construction business. However, the term applies to anyone working for themselves, offering goods and services to companies in any industry.
When you add the word “general” to “contractor,” it means the person is overseeing and handling some construction project.
If a general contractor hires an independent contractor to work on their job sites, usually, they will be referred to as a subcontractor.
A subcontractor is someone who is not a full-time employee of your business and who the contractor hires to work on a project. Contractors will bring on subcontractors when they are hired for a job that requires more than one person. Like contractors, subcontractors also have special skills.
You might hire a general contractor for a construction project who then will bring on subcontractors that specialize in specific parts of the job, like:
This means that the subcontractor might not be on the job site for the whole project; instead, they will simply step in when their expertise is needed.
If you are working in a non-construction industry, your contractor might bring on subcontractors who specialize in:
So, if you are working with an ad agency to create a brand for your business, they might choose to bring on a subcontractor who specializes in digital marketing rather than print marketing.
The critical difference between contractors and subcontractors is the chain of command and responsibilities.
As a business owner, you are not responsible for hiring subcontractors — the contractor will do that. Subcontractors are technically employed through the contractors, not through you. Usually, the contractor will have worked with the subcontractor before, so they will know who’s best for the job.
In addition, when you need something fixed or altered, you should communicate through the contractor, not the subcontractor.
Hiring contractors can be an excellent resource for your business. However, you must ensure you are prepared and knowledgeable about insurance to protect the hires and your business.
You need general liability insurance when you hire a contractor (even if you aren’t hiring contractors). This will protect your small business from claims about personal injury or property damage. This applies to contractors, customers, and employees.
Lawsuits are costly and can have substantial negative effects on small businesses. Make sure you have a policy and that your insurance covers:
It is important to note that many contractors will ask you whether or not you have general liability insurance. Some will not work with businesses that do not carry a policy. If you do not have GLI, start your research today.
When hiring general contractors for a project, you must ensure they carry an up-to-date worker’s compensation policy. When manual labor is involved, it’s vital to have worker’s compensation because it will protect both parties involved.
More importantly, every state except Texas requires worker’s compensation insurance by law, so make sure you stay compliant.
The term “gig economy” has become commonplace in the last five years. The gig economy refers to the notion that people are working for themselves and marketing their services to several businesses rather than working for one company.
34% of workers in the U.S. worked as independent contractors in 2017. Because of the pandemic, that number is continuing to rise.
What does this mean for you? Well, contractors are generally cheaper than full-time employees. In addition, because contractors work for themselves, sometimes their income is not as steady. This means they are motivated to find new jobs and do them well.
Instead of keeping someone on staff for a job that is not a constant in your business, independent contractors are the perfect solution. Advantages to hiring contractors include:
When considering hiring an independent or general contractor, consider the following three strategies.
Technology holds so many possibilities — even hiring an independent contractor! Several apps provide reliable and transparent options, such as:
Sometimes the most reliable way to obtain information is the old-school way: word of mouth. Ask your friends, family, or colleagues if they have had a positive experience with any of their contractors. Referrals are a great resource because they can provide an extra sense of comfort when bringing someone new around your business.
Also, if you’re looking to combine old school with new school, try the following methods to find reviews on potential contractors:
Job hiring sites are not just for full-time employees. You can create a job opening for a temporary position, freelance position, or whatever fits your needs. Credible job posting sites include:
We’ve covered a variety of information about contractors and subcontractors. But let’s break down the five key takeaways:
If you’re interested in more business advice and assistance, Hoist can help. Check out our website for more information.
Sources:
What to Know About the Gig Economy ⎸ U.S. News
Employee Referrals Remain Top Source for Hires ⎸ Society For Human Resource Management
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