Guide to Subcontractor Management
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Overview
Subcontracting has rapidly grown in popularity over the last few decades. particularly in the building and trades sector. The aim of this guide is to provide you with a quick snapshot of the process of subcontracting, and some key insights into how to best find and manage your subcontractors.
Benefits of Subcontracting
The fantastic thing about subcontracting is its flexibility. If you do subcontracting right, you are able to quickly and easily scale up and down your business as required. Like a Hollywood Studio, you are able to bring together skilled people for particular projects to create something truly special, and then disband them until the next project comes along.
Along with the flexibility, sub-contracting can bring other benefits including:
- Minimising or Eliminating costs associated with traditional employment such as superannuation, payroll tax, administering PAYG withholding, Workcover, Long Service Leave, etc.
- Minimising or Eliminating risks associated with running a business such as costs exceeding revenues, liabilities associated with accidents, etc.
Fundamentals of Subcontracting
Whilst the benefits of sub-contracting can be substantial, it must be done correctly. From a legal standpoint many of the benefits can be lost if a subcontractor is "deemed" to be an employee. For this reason, you should take the time and effort to set up your subcontractor relationships properly.
We recommend that you seek professional advice in regards to this. When speaking to these professionals, ask them for guidance on matters such as:
- Ensuring that there is a contract that has been agreed to and executed by yourself and your subcontractors.
- Ensuring that each subcontractor is doing no more than 80% of their work/revenues from your business each year. Ask your advisor about this 80/20 rule, it is quite significant.
- Taking into consideration the level of independence that each subcontractor has (or doesn't have) including their ability to manage their own time, provide equipment, negotiate prices, etc.
Managing Subcontractors - Subcontractor Management Systems
We fully recommend that you utilise a Subcontractor Management System (such as Eaco) that can provide you with a systematic way to:
- Capture and store the agreements that you have with your subcontractors.
- Induct your subcontrators into your organisation and Train them in your ways.
- Manage their Compliances to ensure that that you are protected. Helping you instantly identify if all of your subcontractors are up to date with the Licences, Insurances, Inductions, Training, Contracts, etc.
- Allocate work to your subcontractors and keep track of their progress.
- Manage quotes and invoices that you receive from your subcontractors, compare them against the agreed schedule of rates, and facilitate quick and easy payments to your subcontractors.
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