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What is Subcontracting?

Subcontracting is common in the construction industry, where subcontractors are hired to perform specialized tasks such as plumbing or electrical work.
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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 October 2014
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Subcontracting is a type of job contract that seeks to outsource certain types of work to other companies. This is a step down from general contracting, which is a contract overseeing a much broader project in many cases. It's typically done when the general contractor does not have the time or skills to perform certain tasks.

When a building is being constructed, subcontracting becomes a major deal. A general contractor may take care of a number of tasks, including the brick-and-mortar construction, but look to others for specialized tasks, especially things like plumbing and electrical work. These disciplines are nearly always subcontracted out.

Larger contractors may be able to handle the plumbing and electrical work as well, but this is rare, not only because of the expertise involved, but the desire to focus primarily in one area. If a contractor has too many disciplines, the thought may be that it is not clearly focusing its efforts on quality in any particular area.

In some cases, a general contractor may only be used as the construction manager or supervisor. In that case, subcontracting accounts for all of the physical work done on the premises. The general contractor's only responsibility is to approve the contacts, keep the project within budget, and inspect the work.

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Subcontracting, while prevalent in the construction industry, is also used in a number of other industries. For example, with trucking companies, there may be a time when a specific type of truck needs to be used or there simply are not enough drivers to cover all the routes. In this case, a subcontractor may be called in to help. This can be a permanent, as needed, situation or done simply on a one-time basis, depending on the needs of both the company and subcontractor.

The practice is also important for manufacturers making a number of products from complex components. Computer manufacturers and automobile manufacturers often use subcontractors to supply parts. In an automobile, the engine may come from one company and the transmission from another. They are then put together in a complete package at the manufacturing facility.

Subcontracting offers a number of advantages. First, it allows work on more than one phase of the project to be done at once, often leading to a quicker completion. Second, because subcontractors already have the expertise and equipment to provide the service, it is often much cheaper for them to do the work than a general contractor who may not have that special expertise. They are also usually able to work with a general contractor on more than one project, creating a savings for both in the long run as a relationship is formed.

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sapphire12
Post 3

Subcontractors and independent contractors are often sort of sketchy in terms of taxation and contracts. My dad used to work part time at a motorcycle shop, and he worked every weekday but was paid like an independent contractor because it was cheaper that way for his employer. Meanwhile, in their subcontracting contracts they were able to somehow mask that he was basically a general employee.

hyrax53
Post 2

@harleylane, it sounds like in a way you are. Even if you do not use an actual contract, I imagine the point of this bar is that the dancers come there and pay a slight fee so that they can hopefully make more money dancing; similarly, they help you make more money than you otherwise might if it was just a regular bar.

As long as both parties are working together to earn more money than they otherwise would separately, it could be seen as subcontracting.

harleylane
Post 1

I work for a bikini bar. I am the house mom. The dancers have to pay me 7 dollars a night. The dancers have to pay a 15 dollar house fee to dance there, 7 dollars to me, and 10 dollars to the DJ. The bar has not required me to sign any contract nor the dancers. Now they are telling the dancers and I that I require a subcontractors license, but I am not subcontracting am I?

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