What Do You Need to Know About Subcontractor Agreements?

At some point in time, most businesses have to consider hiring a contractor, either for a project or to make certain services more affordable to a client.
As the employer, you are put in a position of wanting to service a client to the best of your ability but needing additional help for your team. As a result, you’ll need to create a subcontractor agreement.

Unlike the contractor agreement you have with your client, the subcontractor document is between you and this third party. While both of you are in charge of paying your own self-employment and taxes, as the employer, you’ll also be responsible for the subcontractor. Subsequently, you must reach an agreement with the subcontractor specifying the type of work to be done, how it will be completed, how long the project will last and the amount of compensation you will provide.

So, regardless of whether you use generic forms or have a lawyer draw up the document, what do you need to know?

1. The agreement must specify your role as the employer and the subcontractor’s role in relation to the client and the work being done.
2. Even with clearly defined responsibilities for the subcontractor, you as the “main” contractor bear all of the responsibility to the client for the quality of the job.
3. The document must list what type of work the subcontractor is being hired for, the duties their team performs, how long they have to complete it and the standards they must meet.
4. The agreement must list information about compensation, whether it be an hourly wage or a stipend, and about payment protections.
5. Your agreement can also include specifics about behavioral standards of the subcontractor and their employees.
6. As the document isn’t one-sided, it should include protections for you, the “main” contractor.

Along with these points, you’re usually expected to supply the subcontractor the necessary materials and equipment to perform their duties.

Due to the risks involved, a company in your position is advised to take out a policy with liability coverage, particularly if you regularly use a third party for additional services. Should the client sue your company, the insurance policy then assists with your claim.

If you’re thinking about using more subcontractors, consider amending your Business Owner Policy or other commercial policy. To learn more, give us a call today at 203.439.2815.