Subcontractor agreement basics for trade businesses

The first subbie usually arrives before the paperwork does: a busy month, a mate's recommendation, a handshake. It works until it does not, and when it does not, the missing agreement costs more than every job the subbie ever did. This is a plain-language tour of what a trade subcontractor agreement should cover and the classification trap that catches growing businesses. It is general information, not legal advice; a one-hour review by a local lawyer is cheap against what it prevents.

The clauses that actually matter

Scope and standards come first: what work the subcontractor performs, to what standard, and who supplies materials and tools. Payment terms second, with the rate or price, invoicing cadence, and crucially what triggers payment, because pay-when-paid clauses that chain your subbie's money to your client's mood are restricted or banned in many places and poison relationships everywhere. Then the protective set: the subcontractor carries their own public liability insurance and licences, and you sight the certificates annually rather than accepting a verbal yes; defects liability, saying who returns to fix what and for how long; termination on notice for both sides; and confidentiality over your customer list, which is the asset a subbie can walk away with.

Add a variations clause mirroring your customer-facing one, so changed work flows through the same written discipline in both directions. Our variation notice template works unchanged between contractor and subcontractor.

The classification trap

The expensive mistake is not a missing clause, it is the relationship drifting into employment while the paperwork says contractor. Tax authorities apply substance-over-form tests: who controls how and when the work is done, whose tools and financial risk are in play, and how permanent the arrangement is. The US IRS publishes its factors plainly (IRS worker classification guidance), and Australia, New Zealand, the UK and Canada run close analogues. A subbie who works only for you, on your roster, in your branded shirt, under your daily direction, is an employee in everything but invoice, and reclassification arrives with back taxes, leave entitlements and penalties attached.

The protective habits are structural: genuine subcontractors quote or accept jobs rather than filling shifts, carry their own insurance and tools, remain free to work for others, and can send a qualified substitute. If the working reality is a roster, hire properly; it is cheaper than pretending.

Safety obligations do not subcontract

Whatever the agreement says, site safety duties overlap: in most jurisdictions the principal contractor retains health and safety obligations toward subcontractors working under their direction. Practically, that means subbies sign the same SWMS as your own crew, follow the same site rules, and their incidents are your incidents in the regulator's eyes. Put it in the agreement, then make it operationally true: our free SWMS template has a sign-on block that does not care whose payroll a signature is on, and in SKEDS a subcontractor added to a job signs the H&S forms on their phone before clock-on exactly as employees do, which keeps the evidence trail unbroken across company lines.

Managing subbies day to day

The agreement sets the frame; the workflow earns the margin. Subcontractors run profitably when they receive the same quality of information as employees, the site address, access notes, scope and H&S pack, and unprofitably when they run on fragments and phone calls. Give the subbie a defined job with evidence expectations, photos, sign-offs, notes, and their invoice reconciles against a record instead of a recollection. Businesses using scheduling software typically assign the subcontractor to the job like any crew member with a restricted role, which is how SKEDS handles it: they see their jobs and nothing else, no prices, no customer list, which quietly enforces the confidentiality clause better than the clause does. The team plans price this per active user, so an occasional subbie costs little.

Frequently asked questions

Do I need a new agreement for every job?

No. Sign one master agreement covering terms, insurance and safety, then attach a one-page work order or job scope per engagement. The pair is lighter than either document trying to do both roles.

Who pays for the subcontractor's mistakes?

The agreement's defects clause allocates rework between you, but your customer's contract is with you alone; you fix it and recover from the subbie. That chain is precisely why sighting their insurance annually is non-negotiable.

Can a subcontractor use my SKEDS account?

Yes, as a restricted field user on your team: they receive assigned jobs, sign H&S, log hours and photos, and never see pricing or other customers. Deactivating them on the last day removes access instantly on every device.