Especially in recent years, specialization in specific sectors and service areas and the thoughts of enterprises towards cost reduction has brought with them subcontracting practices, or in other words, subcontracting.
Subcontractor agreements, like contracts, come in many shapes and forms. Still, one thing remains consistent – the intent for parties to legally bind themselves to the terms of a business agreement between a contractor and a subcontractor.
A subcontractor agreement is an essential legal document defining the terms of a business-related agreement between a contractor and a subcontractor. Even if your company or organization employs only one person other than yourself, it is still considered an independent contractor (subcontractor) if they provide services or labor to the company rather than an employee. This type of relationship can also apply when a small-business owner works independently as a consultant and their day job.
Subcontractor Definition & Meaning
A subcontractor is a person who takes a job from an employer in auxiliary works related to the production of goods or services at the workplace or in jobs that require expertise in the part of the main work due to the necessity of the business and the job and technological reasons and employs the workers assigned for this job only in the job they have taken in this workplace.
The importance of having a Subcontractor Agreement
With the desire to reduce labor costs in the industry and the formation of new business cultures, subcontracting practices have accelerated. It should be underlined that this practice sometimes threatens the workers’ union rights because its use to abolish workers’ rights and freedoms is frequently encountered in practice. By subcontracting some works, the number of workers is reduced. Many conflicts can be avoided if the subcontractor contract is prepared meticulously and correctly.
What Is Included in a Subcontractor Agreement?
In the subcontractor agreement;
- Workplace title and address of the main employer and subcontractor,
- Name, surname, and address of the employer’s representatives, in case the main employer and sub-employer are legal entities or institutions and organizations without legal personality,
- What is the main work carried out in the workplace,
- What is the job given to the subcontractor,
- If a part of the main work is given to the subcontractor; Technical explanation regarding the requirement of the business and the job and the requirement of expertise for technological reasons,
- If stipulated by the parties, the start and end dates of the work,
- In which part of the workplace the subcontractor will carry out its activities,
- The principal employer will be responsible, together with the subcontractor, for its obligations to the workers of the subcontractor arising from the Law, employment contract, or collective bargaining agreement to which the subcontractor is a party regarding that workplace,
- In the event that the workers employed by the main employer before the subcontracting agreement is made recruited by the subcontractor, the rights of these workers cannot be restricted,
- Principles of execution of the work given to the subcontractor in terms of the parties,
- The signatures of the main employer or his representative and the subcontractor or his representative should be included.
Who needs a subcontractor agreement form?
Hiring a subcontractor is a worthwhile venture that can save businesses time and money in the long run. Businesses, both small and large, can hire subcontractors to help with office work, data entry, and tasks that they may not have the resources or skills to do otherwise. An excellent way to start is by creating an agreement with their sub-contractor to lay out the details of who will do what work and when exactly this work will be completed. Typically, these documents are created for project-based work. However, even if you hire a single person full-time to assist you with jobs, it’s still good to have them sign an official document outlining their obligations. Many contracts are available for businesses to download free of charge. Still, these may not cover many of your unique needs, so it’s best to customize them with your attorney before entering into any agreements.
- Small Business Owners
- Individuals Seeking to Hire Subcontractors
- Home Owners
- E-commerce Business
How to write a subcontractor agreement?
When you hire a subcontractor, there is a chance that they will give you nothing more than subpar work. A Subcontractor Agreement eliminates this problem by clearly stating the terms of the agreement and how disputes are to be solved. The agreement is beneficial to both the client and subcontractor, with each party having a clear understanding of their respective rights and responsibilities to avoid any legal complications down the road.
Here are the phases for writing a subcontractor contract:
This section aims to define the work necessary and the whole project. It includes the client’s demands, the responsibilities of the subcontractor, and your expectations as the contractor. This section will further include allowances for cost overruns, extra work caused by changes in scope, equipment needed for work, permits, insurance, and payment schedule.
A subcontractor agreement provides a schedule for the receipt of payments and the completion of work. You can also use it to include any additional materials needed and how these materials will be delivered to you.
A good subcontractor agreement would cover all the bases of your relationship with the subcontractors. Good communication and mutual performance are fundamental to an agreement such as this. Along with this, you will also want to include a clause about the quality of work that you expect from these subcontractors, as well as their deadline for said work.
In a work contract between contracting parties, clauses are included to allow both parties to agree on specific expectations of their business relationship. When hiring working contractors, as opposed to direct hires, it is recommended that a more formal agreement be formed. While you may think the terms of payment and allocation of liabilities are apparent, it’s always better to have these points in writing.
Non-Disclosure Agreement (NDA)
Last but not least, the employer needs to be aware of potential legal implications when subcontracting work. An agreement for a pre-hire period can be used to settle disputes and nullify all prior agreements if need be due to issues that may arise post-hire. It is also essential to include in the agreement where you can prevent any violation of local or state laws by the subcontractor in terms of competing with you as your business partner while they are under your employment.
A subcontractor agreement template is essential for any business that takes on a contract for outside labor. A well-written contract between the contractor and the subcontractor is also a key component in protecting both parties during the project’s duration. The agreement should include important issues such as payment terms, deadlines, employee interaction and expectations, division of work schedule, and liability concerns.