Subcontractor vs Contractor: Understanding the Difference
This resource article talks about some of the differences between contractors and subcontractors who work in the field of construction. Although these terms are sometimes used interchangeably, it is important to understand the few key differences between the two roles and how they work in conjunction to complete projects effectively.
The majority of construction work is carried out through contracting processes whereby a construction firm wins a contract to complete work and then completes that work in exchange for money. Understanding the role of contractors and subcontractors in making these works happen can help you better optimize the results of your own construction business. First, let’s take a look at what it means to be a contractor or subcontractor; then, we’ll look at some of the differences and how to get them working in your favor.
What is a Contractor?
A contractor is a person or a company that seeks to do business by obtaining contracts and carrying them out. Being a contractor is similar to being a business owner – you negotiate your deals, work for yourself, have your clientele and are rewarded on your own merits. A construction contractor offers a particular suite of skills which he can perform for clients on a contractual basis. As a contractor, you will likely be paid more for work than you would be as a worker because you have put in the effort of finding the customer yourself. Therefore, any profits from contract work belong to the contractor.
What is a Subcontractor?
A subcontractor is a type of contractor. Subcontractors also work on a contractual basis, and they also offer a particular set of skills which they perform for customers. The key point about subcontractors is that they form agreements with the contractor, not with the customer. Subcontractors often specialize in one specific area of construction and try to network with contractors who negotiate for larger jobs that include this area of specialty. In this way, a successful subcontractor will always have work, thanks to their network of contractors.
Managerial Contractors – They make things happen!
It may seem on the surface that the only real difference between a contractor and a subcontractor is the title, but let’s take a moment to unpack how that difference manifests in reality. While contractors need to generate referrals and engage in networking with customers to find business, subcontractors are mostly looking to network with the contractors that have work for them. As a result, contractors need to be far more customer-focused than subcontractors to function effectively.
Furthermore, subcontractors tend to specialize in one specific area, like drywalling, tiling, insulation, or a different trade. This makes subcontractors especially good at product and service delivery for their area of expertise. As a contractor however, you need to see the big picture of a project more than your subcontractors do. This means understanding things like financials, profit/loss, cost of doing business, time invested in a project, managing expectations whether the customer is happy and myriad other potential concerns.
When a contractor hires a subcontractor, the subcontractor thinks “Great, I get to install tiling for a day and I’m going to get paid” and the contractor thinks “Okay, so hopefully Bob shows up tomorrow and gets the tiling done the way the customer wants it, now if I can get the subfloor put in tonight that will be ready for him and I have Gary coming in for the painting job on Thursday…”.
Subcontractors can be very effective workers, but contractors must be organized planners and effective managers. This is what entitles contractors to earn profits on the work of the subcontractors that they deal with.
Dangers and Pitfalls of Subcontracting
As a contractor, it is important to make careful decisions when hiring a subcontractor. Imagine that you hire a subcontractor who lays carpet for your next project. When you check his work, you find that he has done a poor job and that the client will never accept it. He will probably defend the quality of his work; your relationship may sour, and you’ll probably lose time and money trying to clean up the mess.
Subcontractors may also abandon work or display unprofessional behavior while at work, and because they aren’t employees, you’ll have no way to discipline them if they create difficulties around the project. Firing a subcontractor could be seen as a break of contract, and in any case, would leave you needing to hire someone else to complete the work. A subcontractor still represents your business while working on your customer’s property.
Subcontractors also are not responsible for the terms of the original work agreement between the contractor and client. For example, if you agree to finish some work by Friday which depends on your subcontractor, and that person fails to finish the work in time, you’re on the hook for it, not them!
It is very important to hire subcontractors that you trust, and that have a reputation for both doing quality work and acting in good faith when it comes to their business. Subcontractors should be professional in both their business dealings with contractors and in their behavior in the work environment.
As a contractor, the scope of projects you can take on grows with the number of quality, professional subcontractors you have access to. Therefore, it makes sense to build your network of professional contacts as much as possible. Working with subcontractors presents a unique set of challenges but is a great way to increase your profits and create customer satisfaction as a contractor.