Subcontractors are one of the most important people in whole construction business. For this reason, it is necessary for people in the construction industry to fully understand the job that subcontractor covers, the implications of their work, their position in the business, and the benefits and drawbacks of hiring them.
What is a subcontractor? To better answer this question, we must first know what a general contractor/contractor is. A contractor is an individual or a company that pursues business by acquiring and carrying out contracts. They offer a specific set of skills that they can provide to a client on a contractual basis. Contractors can hire subcontractors to fulfill a part of the work in the project, and they use a Subcontractor Agreement to safeguard themselves and the subcontractors that they hire. In this Subcontractor Agreement, the materials, and services that will be produced and performed by the subcontractor, the price of the job, and any warranties are all outlined. A contractor also supervises the construction site, coordinates a construction project which involves assessing project documents or settling the site for renovation projects, is responsible in addressing vendors and trades, in submitting fixed price bids or proposing cost plus price contracts, and they also serve as the central communication point for all participants who are involved. In addition to these, contractors are in-charge in providing the labor, services, equipment, and materials that are necessary to complete a project. They may formally ask for permits, supply temporary on-site utilities, guarantee that the property is safe, and they may also be accountable in monitoring cash flows, and keeping accurate records. A contractor will also probably earn more for a project than workers because they found the customer themselves.
Now, what is a subcontractor? A subcontractor is a person or a firm that is contracted to execute a job by a contractor and not the customer. Subcontractors do work on both large and small construction sites. If contractors are considered the managers, the subcontractors are the workers. They frequently specialize in one specific area of the construction industry which permits them to complete their job swiftly, and they try to network with contractors who take larger jobs which involves the same area of specialization, this way they will always have a project to work on. But in most situations, they are not seen as an employee of the contractor, but instead, as an independent contractor, and they can also be freelancers or vendors. In addition, subcontractors, either an individual or a firm, answers to the prime contractor who is responsible and accountable in managing the construction project from initiation to completion. They are also self-employed most of the time, which gives them the freedom to manage their own workdays and availability and depending on the Subcontractor Agreement, they may be tasked to provide their own equipment and materials for the construction project. Becoming a subcontractor can be really stressful and tiring, but with the use of a construction project management software like Pro Crew Schedule for construction crew management, the job can be done with more ease and proficiency.
Contractors and subcontractors work hand-in-hand to complete a construction project. The overall mechanism between the relationship of the contractor and a subcontractor works in a way that, when a client hires a contractor to build a certain project, the contractor can create a contract or an agreement with a subcontractor to build the walls and to another subcontractor to install pipes. In this arrangement, both subcontractors work for the contractor, while the contractor works for the client. In a nutshell, contractors negotiate with clients, manage the project, and functions as the main point of communication, and subcontractors may work on a part of the contractor’s agreement with the client, and they complete the job. And for subcontractors to do their job more efficiently, it is important that they find the best construction management software which will greatly help them.
Subcontracting pertains to the practice of delegating, or outsourcing part of the responsibilities and tasks included in a contract to another entity, either an individual or a firm, known as the subcontractor. It is also extremely beneficial in situations when the variety of required capabilities for a construction project is too diverse to accomplished by a single contractor. In such situations, subcontracting sections of the project that are not part of the contractor’s core capabilities may help in maintaining the expense in control, alleviate the overall risk of the project, and it may even create a defense in a significant situation. Other than this, subcontracting simple but essential jobs can help free up resources and time that will allow the contractor to focus on other gainful undertakings. Another great asset of subcontracting is that it can help keep the cost under control is because the contractor is not responsible for paying a subcontractor’s health insurance, compensation benefits, full-time salary, vehicle and liability insurance, and Social Security taxes.
Hiring a subcontractor has plenty of advantages that can highly help a construction firm or project to become efficient, productive, and to help it succeed.
Advantages of Subcontracting
One of the advantages of subcontracting is that subcontractors are experts in the area of services that they provide, which cannot be provided by regular staff. Frequently, they have been doing that specific work for a number of years, they have had plenty of opportunities to master the necessary skills in that field, and they have done the same work before which will allow them to finish the job quickly and efficiently.
- Less Risk and Economical
Subcontracting helps prevent risk when you hire an attested firm with substantial experience. It is also much more cost-efficient than hiring new full-time employees because although subcontractors commonly cost more than a self-performing in-house, it is still more cost-efficient. Afterall, they do not receive benefits, office space or equipment, and one will not need to pay for their full-time salary and employee taxes.
- Huge projects
A huge project situation will come that a construction business will need to take a bigger project. When this time comes, subcontractors will be a huge help with their expertise and experiences, and this allows the business to create customize teams to build projects for the new clients.
- Legal Responsibilities
Besides the earlier mentioned cost benefits, the employer will not need to send payroll deductions and taxes to the government. Because in the law’s perspective, subcontractors are the operators and owners of their businesses, which means that entitled to the same legal protections as employees.
Another huge benefit of working with a subcontractor is to increase productivity. Instead of using your employees’ time in doing mundane but essential tasks, outsourcing will save time because the subcontractor is an expert in that field, and it will also allow employees to focus on the core needs of the construction project.
Subcontracting makes a business more flexible than hiring new permanent employees. Instead of hiring new employees, one can hire a subcontractor that can work on a short-term project and then separate ways.
Subcontracting has a lot of benefits, but it also has disadvantages that a construction business or contract should remember and watch out for.
Disadvantages of Subcontracting
- Developing Skills
One of the downsides of relying on subcontractors is that full-time employees in a business will not be able to cultivate and acquire new skills in the areas that subcontractors do, because they do not practice and experience the job.
It important that the contractor understands all the legalities. A worker can be considered a subcontractor or an employee, and it is important to check and ensure employment status, significant tax implications, and other rights.
It was mentioned above that hiring a subcontractor can cost less than hiring a new employee. But there are times that hiring contractors and subcontractors can result in a higher expense for the business than employing someone. Situations like this can occur when one hires an unreliable person to do the job.
Another disadvantage subcontracting is that situations can occur when subcontractors do not have the same business culture as you or do not appreciate your business environment because this can result in a lack of commitment and motivation which can affect work productivity.
Another disadvantage of hiring a subcontractor is that permanent employees may resent the subcontractors who are being compensated more by doing jobs that are similar to what they are doing.
When a construction firm hires a contractor that hires a subcontractor, the firm will not have straight control over the quality of the subcontractors’ performance and work.
Subcontracting has a number of both advantages and disadvantages, but at the end of the day, hiring subcontractors that construction firms and a contractor find reliable is the most important thing to remember, because in this way, the benefits of subcontracting can be maximized, and its drawbacks can be limited.