Using contractors and subcontractors

Contractors and subcontractors - the difference

Contractors provide agreed services for a set fee and duration under a contract for services with the business (client). This is not a contract of employment.

Many businesses typically use contractors for:

• building work
• catering
• cleaning
• gardening
• copywriting services
• IT maintenance and support
• security services
• recruitment

Contractors can charge the client fees by the hour or day or on a lump sum basis. Their contracts often specify milestones for part payment, eg on completion of specific goals.

Subcontractors undertake a contract from the contractor.

Subcontracting - also known as outsourcing - involves the contractor entering a commercial contract to get a job done. Read about flexible contracts and subcontractors on the Acas website.

Subcontractors can be:

• large organisations that undertake to complete part of the contractor's contract
• employed under a contract for services
• small, one-person businesses, partnerships, limited companies or co-operatives

An employee of the contractor cannot also be a subcontractor.

Subcontractors carry out work that a contractor cannot do but for which the contractor is responsible. For example, a building contractor may hire a subcontractor to complete the electrical wiring part of the contractor's building job. The contractor is responsible to the client for the building job including the part performed by the subcontractor.

Subcontractors might work on task-based contracts with no fixed date, long-term arrangements which can be discontinued at any time, or fixed-term contracts.

Subjects covered in this guide

• Introduction
• Contractors and subcontractors - the difference
• Pros and cons of using a contractor or subcontractor to provide staff
• Employment status - implications for tax and worker rights
• Health and safety requirements for employing contractors
• Other legal points to consider when employing contractors
• Get the most from contractors and subcontractors
• Protect your business from rogue contractors
• Here's how the use of a short-term contractor added value to a project

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Source - Business Link; Crown Copyright.