Contractors and subcontractors are different. You will have heard of both business types but how are they different?
Many businesses operate as both contractors and subcontractors.
We will explain what the difference is between both business types and how they often work together in the real world. We will also provide details on how to register as a contractor and register as a subcontractor.
Most construction contracts have numerous businesses involved. Typically there will be the main contractor who’ll win the contract. They are hired directly by the client or project manager.
A contractor is hired to carry out a specific project from start to finish. An example of a typical contractor project would be to build a new housing development.
The task will usually require numerous building trade skills. As a result, most contractors specialise in more than one skill, or they have a core of employees able to carry out these skills.
Where there are gaps in expertise or during busy periods a contractor will hire subcontractors.
A subcontractor is hired by a contractor. They are not hired directly by the client.
They are hired by the contractor to carry out a specific task, which will just be a part of the overall project.
Typically they will specialise in one building trade skill. An example of a subcontractor would be a bricklayer, electrician, plumber, etc.
Yes. In our experience it is very common to at some point in the life span of the business to act as both.
Let us say that the project is to build a new housing development. The contractor has the ability to carry out the building, electrics, etc but requires subcontractors to complete the painting work.
A painting company is therefore hired to complete this task. They have a small number of core employees but the project requires more painters. They could hire more employees but this would only be recommended for long term projects or a growing business.
The temporary solution for the painting company is to hire subcontractors to cover the extra work.
The painting company became a subcontractor when they were hired by the building contractor. They’ve now become a contractor when they take on subcontractors to assist with the painting work.
Potentially there is no end to how far the chain can be. Subcontractors don’t have to carry out the tasks themselves, they are only responsible for the task being done as agreed. They could always hire subcontractors themselves making the chain endless.
Registration as a contractor is compulsory. See further detail on when you must register as a contractor and how to register.
Subcontractor registration is voluntary. See further detail on when we recommend registering as a subcontractor and how to register.
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