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Let’s say you’re a general contractor beginning work on a complicated new home improvement project for a new client. Chances are, you’ll be wondering how to hire a bigger team to take care of the umpteen specialty jobs on the project. But, can a contractor hire a subcontractor?
Yes. And, we’ll see how, in this article. The truth is, unless you’re handling smaller renovations that do not require a certain level of expertise, you’re going to have to hire a subcontractor at some point. If a client hires you for a really big project, such as a room addition, a kitchen remodel, a bathroom renovation, or a roof replacement — turning to other specialized professionals is a good choice. Contractors and subcontractors can work together to complete home remodeling projects effectively.
That way, you can create a set of expectations regarding general duties and the performance of work — while being in charge of their services. Once you describe exactly who is responsible for which task, the home renovation work can be completed in its entirety — and on time.
This is crucial because you’re ultimately responsible for the project being finished to the customer’s satisfaction as a general contractor.
Contractor vs subcontractor: understanding the difference
The difference between a contractor and subcontractor lies in the roles they play in the field of construction. Let’s take an example from life to understand the differences. A contractor is like an event planner for a wedding or any other celebration. You pay them to use their experience and organizational skills to bring together the best baker, caterer, or florist. Why, you don’t expect them to bake the cake, cook a lavish meal, and arrange the flowers too, do you? The other experts they hire are like subcontractors in the realm of the construction business.
To understand this more, let’s take a look at what it means to be a contractor or subcontractor.
What is a contractor?
A contractor is a person or construction company that seeks to do business with homeowners for their construction/home improvement project. They bid for the job, negotiate deals, and obtain contracts from the client. Basically, a construction contractor offers a particular set of skills — project managing the entire renovation process from start to finish.
What is a subcontractor?
A subcontractor is a type of contractor. They also work on a contractual basis but they typically form agreements with the contractor — not with the homeowner or customer. In other words, subcontractors are simply contractors working under other contractors. The reason subcontractors seek contractors is that they strive to offer their specialty in one specific area of construction through their network of contractors.
Why do contractors use subcontractors?
A general contractor will definitely need some extra hands on a large project. Moreover, hiring subcontractors for that particular job is more cost-effective than bringing in new, full-time employees. Most importantly, you don’t have to pay them employee taxes and a full-time salary.
Hiring subcontractors helps in forging relationships with other tradespersons. It gets the job done and may lead to referrals for the future.
Can a specialty contractor hire a subcontractor?
When homeowners or construction firms hire contractors, they expect them to provide the labor, services, and equipment in order to get the project completed. And, communicate with the client to meet all the contractual expectations and project deliverables.
As an independent contractor, you can bring subcontractors in to help you complete the work — especially for the various specialty tasks. For example, plumbing, flooring, roofing, landscaping, air-conditioning, etc.
If you’re hired to paint the walls of a house, but notice the damaged molding, you can hire a subcontractor to fix it before you prep it and begin painting.
Can a contractor back charge a subcontractor?
Since a contractor is legally responsible for building or renovating a property, he or she remains liable till the task is complete. Additionally, the subcontractors are liable to the general contractor. Contractors can back charge a subcontractor if they fail to perform properly according to the terms and conditions of their contract. By the way, construction back charge occurs when the subcontractor owes money back to the contractor they’re working for. That’s why contractors assess the back charges against the subcontractor when things don’t go in the right direction.
Similarly, the general contractor is obligated to pay the subcontractor he or she hires. If a general contractor doesn’t pay the subcontractors, they can make a claim against the payment bond. In such a situation, the surety company can take the contractor to court.
Read more: Can a general contractor do electrical work
Things to remember
Working with subcontractors may be standard practice in the construction industry but there are some legalities involved too. As a contractor, before hiring a subcontractor, you should study up on the subcontractor taxes, contractor insurance, and contract provisions. Make sure the subcontractors sign the agreement so that they can help you complete the job without putting you through any unnecessary financial risk.
The agreement or contractor contracts should include:
- A complete list of the subcontractor’s assignments and responsibilities
- Their due dates for the project completion
- Payment terms for their specialized work
- Rules and regulations
Furthermore, the Internal Revenue Service (IRS) defines subcontractors as separate entities who’re expected to pay their own self-employment taxes and manage their own work and schedules.
Ensure that you carefully review the subcontractor employment contract. If the agreement allows subcontractors to hire subcontractors, you, as a contractor, won’t be directly responsible for their performance. But, you will have a right to inspect the quality of their work.
With regard to contractor insurance, it’s important that each one of your subcontractors maintains their own liability and workers’ compensation insurance policies. Maintain proof of such business insurances by getting certificates of their insurance coverage. This will not only ensure you that the insurance policy is active but also that its coverage matches those required for the job.
If you hire uninsured subcontractors, you’re taking additional risk. It will affect your general liability insurance — increasing your liability exposure and insurance premium by the insurance companies. Something that needs to be avoided at all costs.
The final word
So, we’re sure, you’re not wondering, “Can a contractor hire a subcontractor” anymore. You, the contractor, may go out and hire different subcontractors to execute the home improvement project. However, before you do, weigh all the advantages and disadvantages of bringing in another party. Be sure to have solid, written subcontractor agreements in place. While you foresee a great working relationship with your subcontractor(s), you don’t want anything creating a financial fallout in the future. Knowing your rights as a contractor and a few subcontractor laws now will help you avoid expensive problems later.