What is the difference between a contractor and a subcontractor

For business owners, business managers and employers, it’s important to understand the key differences between contractors and subcontractors, as well as how they operate.

First and foremost, contractors are not considered employees, meaning they are not legally bound by an employment contract. Therefore, having a legally binding Contractor Agreement for all contractors your business engages with is critical.

What is a contractor?

A contractor is a person or business who works directly with a client to execute a job, offer a service, or deliver materials. Subcontractors are frequently hired by contractors for larger projects that require specialised expertise or extra hands on the job.

For example, you could engage a contractor to build a new property. The work may then be subcontracted to others by the original contractor. Specialist trades, such as electricians and plumbers, may fall into this subcontractor category.

What is a subcontractor?

When you hire a contractor to finish a project, your contractor may hire a subcontractor. A subcontractor will interact directly with the contractor rather than with you, the primary client.

If you’re a contractor and you want to hire a subcontractor, make sure you understand your legal obligations. A contractor may be held accountable to a client for any subcontractor’s inadequate work.

Contractors, subcontractors, and legally enforceable contracts

When engaging the services of a contractor or subcontractor, it is imperative that you set expectations of roles and responsibilities within a legally enforceable contract. You can construct an Independent Contractor Agreement for an individual person, or a Company Contractor Agreement to hire a company as a contractor. There are plenty of online resources available that can help you create both of these kinds of agreements online. A Sub-Contractor Agreement is also available if you are a contractor considering hiring a subcontractor. More information about Contractor Agreements can be found on the Fair Work Ombudsman website.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. © 2024 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769

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