What is the Difference between Subcontractors and Independent Contractors
“Contractor” means a person hired to carry out work or services according to the agreement. These are full-time workers who work for a single organization that retains taxes and pays benefits for its employees. A self-employed specialist is liable for their profit, taxes, medicare, insurance, and retirement.
Cost estimating software should be used today by modern specialists in all projects. It is the key to success. Especially when it comes to the construction sector, contractors must pay taxes and profits to subcontractors and other team members (estimators, managers, builders on the site, etc.). A general contractor can hire an independent contractor, the same as a sub.
Subcontractors VS Independent Contractors in Construction
Many experts name independent contractors as the alternative party to the subcontractors hired by the general contractor (GC). Most of them cover operational and legal backgrounds to take into account. Nevertheless, there is a range of small differences between these two definitions in the construction sector.
A distinction between subs and independent contractors is:
- contractors hire subs if they need an expert in a specific sphere;
- subs get a part of what contractors receive for a whole job, and contractors (in turn) earn money per job or by the hour;
- subs offer more narrowly focused services and are well qualified in such areas as plumbing or electrical.
Subs deal closely with contractors to be sure their part of the job is performed properly. Taxes are one of the aspects of the piece of liabilities for contractors and subs. Contractors and subs pay taxes once annually. Pay attention to such costs as internet provider services or rent for premises.
What Are the Benefits of the Independent Construction Contractor?
There are a lot of advantages to working for yourself. To start working as a sub, an individual should develop some specific skills and get the necessary certifications. The most difficult thing is to get the first project. It is essential to perform it perfectly. Clients often deal directly with independent contractors, who pay the chosen professional subs they hire to carry out various project tasks.
What about the Advantages of Subcontractors in the Construction Niche?
There may occur such situations when something goes wrong on a project. It may be problematic to understand and specify who is responsible for the mistake. Contractors and subs have different responsibilities that can influence the insurance regulations an individual has to consider before his next project.
A contractor is responsible for performing the contract, which means carrying out the entire project. Subs help a contractor to do it. They report to the contractor about undertaken site operations and the deadlines met or failed. Nevertheless, the area of responsibility for subcontractors is quite limited.
- The contractor is ultimately responsible to the client.
- The contractor needs to perform estimates, provide reports, and budget plans. At the same time, independent contractors are obliged to do more things from a legal point of view as well:
- When subs are responsible to the contractor but not to the client, the independent contractor has responsibilities to all the parties of the signed contract (the customer, the GC, etc.).
General liability insurance ought to be the first insurance document an owner buys. This policy will protect him from lawsuits. A cyber liability policy protects from the expenses of an information breach or cyberattack.
To sum up, the most significant difference between subs and independent contractors is the area of their responsibilities. The subs can perform successfully in the niche with limited obligations and rights. Additionally, the more complicated legal background involves those construction market players who want to run their businesses independently.
It is better to become an independent contractor if you are interested in scaling up your business. Subcontractors are mostly skillful narrow-direction specialists who are satisfied with orders from contractors for generous and regular payments (with no desire to run an independent business or grow as a separate-standing company in the local markets).