Subcontractor agreements: Contracts for sub-contractors

- September 10, 2010 3 MIN READ

Engaging sub-contractors can help you grow your business without taking on any debt. But it pays to put plenty of thought into your subcontractor agreements first.

What are your objectives?

When the time came for me to hire sub-contractors for my business, my priority was to find someone flexible who had a go-getter attitude, but wasn’t (yet) entrepreneurial enough or experienced enough to branch out on their own.

Admittedly, I also liked the idea of paying only for the services I used as opposed to being responsible for an employee and their wage.

Source: Work your way Flying Solo’s step-by-step course. View more.

Recruit carefully

In my experience, the recruitment process is somewhat blurred by the sub-contracting paradigm – it’s not an option that will suit all candidates. That aside, it’s important to recruit as carefully as possible.

As soloists, our customers are quite often buying our personal brand. Our expertise, our reputations and our style are at the heart of our businesses.

Putting someone other than yourself in front of your clients can sometimes be a problem. To minimise the risks, you need to contractually ensure that they’re in the right frame of mind and will do the right thing by you, your brand, and your intellectual property.

Have watertight subcontractor agreements

Over the years I’ve developed a subcontractor agreement that helps ensure my subbies understand exactly what their obligations are when working in my business. If you’d like a copy of it for your personal use, you can download the subcontractor agreement here.

Based on my experience, important issues to consider when preparing a subcontractor agreement include those below.  I hope you find this list thought provoking.

  • Termination: The beginning of a relationship with a contractor may sound like the wrong time to be thinking about its conclusion, but failure to clearly define how things will end before they start can result in a lingering and painful situation.
  • Payment: There’s more to paying sub-contractors than just paying their invoices. Customer satisfaction, delivery and variations need to be considered.
  • Confidentiality: You need to ensure that your contractor is conscientious with any private information they encounter while working for your clients and also treats information about your own business as confidential.
  • Policies and procedures: Make sure the services and other things that make your business unique can be replicated by your sub-contractor, and that these policies and procedures are spelt out in the contract. If you haven’t already done so, now is the time to create your procedures manual.
  • Insurance: Make sure the appropriate person is aware of their obligations. Don’t assume your insurance covers anything without checking with your supplier.
  • Responsibilities: The level of empowerment you give your subcontractors needs to be clearly defined. Bear in mind that the level of ownership and pride they have over a completed job often depends on how much of themselves they’ve been able to contribute.
  • Attitude and personality: If your branding includes a certain attitude or mode of operation, then you’d better make sure your subcontractors buy into it and sign up for it. I haven’t seen a Virgin employment contract, but I imagine it includes a lot of words about playfulness, having fun and being different to the competition.
  • Customer expectations: I also have a document called a “Client engagement agreement” which defines how my clients and I interact with each other. Obviously your subcontractors need to understand and adhere to agreements like this in the same way you do yourself.

These tips are just the tip of the iceberg. Seek appropriate legal guidance to determine whether there are other issues that should also be considered in your own business.

Stick to your guns

There’s no point having subcontractor agreements if you don’t enforce them.

If a prospective subcontractor isn’t prepared to sign it, take that as an indication that you probably don’t want to work with them. The document will have just paid for itself.

People problems are often the biggest problems in a business. Can you share any more tips for preventing issues before they arise?