Subcontracting refers to the process of entering a contractual agreement with an outside person or company to perform a certain amount of work. The outside person or company in this arrangement is known as a subcontractor, or may also be called a freelance employee, independent contractor, or vendor. Many businesses hire subcontractors to assist with a wide variety of functions. For example, a small business might use an outside firm to prepare its payroll, an accountant to help with its record keeping and tax compliance, or a freelance worker to handle a special project. Subcontracting is probably the most prevalent in the construction industry, where builders often subcontract plumbing, electrical work, drywall, painting, and other tasks.

Hiring subcontractors offers a number of advantages for businesses. For example, subcontracting mundane but necessary tasks can free up time and resources to enable the business owner to concentrate on making money and growing the business. In addition, hiring a subcontractor is usually less expensive than hiring a full-time employee, because the business is not required to pay social security taxes, worker’s compensation benefits, or health insurance for independent contractors. Subcontracting does pose some potential pitfalls, however, such as a loss of control over the quality and timeliness of work. 

Business owners can take a series of steps to help ensure that the subcontracting process provides the desired benefits.  First, it is import to assess the needs of the business to make sure that outside help is needed, decide which specific tasks or projects to subcontract, and determine what sort of subcontractor could best perform the work. The business owner should also give some thought to the type of relationship he or she wants to have with the subcontractor. 

Some businesses choose to share control of the project or process with a trusted subcontractor, even including the vendor in strategic decision-making. Indeed, subcontractors in many industries are often sources of valuable information and insight on ways in which business owners can save time and money to improve quality. Other companies choose to maintain a high degree of control internally and subcontract only minor projects on a limited, as-needed basis.

The next step in the subcontracting process involves preparing in-house staff and obtaining the support of key personnel for the decision. Many companies encounter resistance from employees who feel that their jobs are threatened by subcontracting. Other companies may even find that turnover increases when the most interesting or fulfilling jobs are outsourced, leaving employees to perform less attractive tasks. To avoid these problems, in-house employees should be informed of the plans to subcontract work and told the rationale behind the decision. The business owner may also wish to get employee input about what work is appropriate for subcontracting, and take steps to make sure that employees continue to receive rewarding, interesting, career-building responsibilities.

The next step is to begin contacting potential subcontractors, either formally or informally, and asking specific questions about the services provided and the terms of the contract. The questions should also seek to assess the subcontractor’s intentions, or what they hope to gain from the relationship. Some subcontractors may be seeking a long-term business relationship, while others may simply wish to gather information in order to complete their work in a timely, professional fashion. Overall, the questions should establish whether the subcontractor will provide a good fit with the business client. Ideally, the subcontractor will have experience in handling similar business and will be able to give the business’s needs the priority they deserve. 

Once the subcontractor has been selected, the business owner should then negotiate a contract in order to help ensure a mutually beneficial relationship. This document should include tangible measures of job performance, as well as financial incentives to encourage the subcontractor to meet deadlines and control costs. The contract should clearly define responsibilities and performance criteria, so that no questions arise later about whether the subcontractor or the client was supposed to handle a certain task or pay any extra charges incurred. The contract should also outline the procedures for changing the subcontractor relationship, including the means for renewal, cancellation, or termination. Finally, the contract should set strict confidentiality rules if needed and specify who owns the rights to any new ideas, inventions, or materials that are created from the business arrangement.

The next step is to prepare the subcontractor to interact efficiently with the client company during performance of the contract. The business owner may wish to introduce the subcontractor to key employees, for example, and establish reporting relationships. It is also important to arrange periodic progress reports from the subcontractor, as well as feedback about both the project at hand and the overall relationship. At the conclusion of the project, the business owner should conduct a post-mortem and provide the subcontractor with an evaluation of their work.

When it is all said and done, the use of subcontractors can be a tremendous boon or a terrible bane to a small company. Skilled, professional subcontractors with a strong work ethic can help boost your company’s financial success and burnish its reputation with clients and community alike. Conversely, contractors who turn in sloppy or tardy work or behave in an unprofessional manner can quickly stain your company’s name, and leave business owners (and any staff) with a heavier, messier workload. Given these factors, the wise business owner will choose his or her subcontractors judiciously and take special steps if necessary (such as sweetened financial compensation) to hold on to those with proven records of reliability and performance.


If you find this article useful, please share and subscribe to our newsletter.

Bernard Taiwo

I am Management strategist, Editor and Publisher.

Next Post


Thu Sep 29 , 2022
<div class="at-above-post addthis_tool" data-url=""></div>HOW ADMIRABLE CONSUMER PACKAGING TAKES PRODUCT OFF THE SHELF Packaging refers to the container or wrapper that holds a product or group of products.  Most commercial packaging serves two basic functions: protecting the product from damage during shipping, and promoting the product to the ultimate consumer. Some common types of packaging […]<!-- AddThis Advanced Settings above via filter on get_the_excerpt --><!-- AddThis Advanced Settings below via filter on get_the_excerpt --><!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons above via filter on get_the_excerpt --><!-- AddThis Share Buttons below via filter on get_the_excerpt --><div class="at-below-post addthis_tool" data-url=""></div><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><!-- AddThis Related Posts below via filter on get_the_excerpt --><div class="at-below-post-recommended addthis_tool" ></div><!-- AddThis Related Posts generic via filter on get_the_excerpt -->

You May Like

Chief Editor

Johny Watshon

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur

Quick Links