Subcontractor Agreement

A Subcontractor Agreement is a legally binding document between a general contractor and a subcontractor to outline the terms of a smaller job within a more significant project.
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Frequently Asked Questions

Usually, a Subcontract Agreement refers to outsourced jobs for a construction project. While this is often the case, there are many other occasions when a Subcontractor Agreement is required. Sometimes a cleaning subcontractor is necessary; other times, it's an IT subcontractor.
Common types of Subcontractor Agreements include janitorial, HIPPA, solar panel installation, concrete pouring, painting, or electrical subcontractor. But you can apply this type of agreement to many more types of projects.

At first glance, it might seem that the Subcontractor Agreement benefits the general contractor more than it does the subcontractor.
One might argue that they use it to protect themselves from liability. However, it's usually the subcontractors that see more benefits from this type of contract.
It's a clear and formally written document that outlines the scope of their work, timeline, and payments. It protects the subcontractor from being held responsible for a job they weren't hired to do and receiving appropriate compensation.

There are several key differences between an employee and an independent contractor (or non-employee). First, the contractors and subcontractors are fully responsible for filing their taxes, which you calculate differently.
Furthermore, you typically offer the employee benefits from their employers, such as health insurance or pension plan. Overall, an independent contractor has more freedom in their work but is also responsible for things the employee is not.

To ensure you don't label the subcontractor as an employee, as the general contractor, you don't provide materials, training, benefits, or pay taxes for them.
Essentially, the subcontractor should not depend on the general contractor to complete the employer's task but offer a complete service.

If the subcontractor doesn't finish the job on time – or at all – or breaks the terms of the Subcontractor Agreement, the contractor can call on the dispute resolution clause.
They might refuse to pay the subcontractor or even request arbitration to resolve the issue. The same applies if the contractor doesn't pay the subcontractor or abide by the terms of the agreement.