Subcontractor Agreement Template

A subcontractor agreement is a legal document used by a contractor when bringing in another worker or company, known as a subcontractor, to assist with a project or deliver a particular service. This practice is common, especially in fields like construction.

Typically, the independent contractor already holds a service contract with a client and may bring in a subcontractor to handle specific aspects or even the entirety of the project. The subcontractor agreement is usually appended to the contractor’s agreement with the client and will detail the roles, obligations, liabilities, and any other terms governing the subcontractor’s involvement in the project.

Subcontractor Agreement – By State

Table of Contents

• Subcontractor Agreement – By State
• What Is a Subcontractor? 
• How to Hire a Subcontractor
• What Should a Subcontractor Agreement Include?
• How to Write a Subcontractor Agreement
• Subcontractor Agreement Sample
• Frequently Asked Questions

What Is a Subcontractor? 

A subcontractor is an individual or company that works in a specialized industry and provides services to a contractor for a fixed fee.

The most common example is in construction, where the general contractor schedules and budgets the entire project and then subcontracts with carpenters, electricians, plumbers, and others to complete the project.

Subcontractors may be freelancers, contractors within their area, or product vendors. They are independent entities working for themselves, not the general contractor.

Employee vs. Subcontractor

The primary difference between an employee and a subcontractor is that the employee works for the company. The subcontractor is an independent contractor carrying out services for the primary contractor.

Some key differences between the two include:

Tools and Materials

Employees are given tools and equipment by their employers, while subcontractors typically own them and bring them to the job site.

Wages, Taxes, and Benefits

Employees receive hourly pay or salaries from their employers, and the employers withhold payroll taxes from their pay. Employees receive benefits from employers such as vacation time, holiday pay, and pension plans.

Subcontractors are paid per project and are responsible for their taxes and insurance.

Job Duties

Employees are hired by their employers for various job duties and tasks, while subcontractors are engaged to carry out a specific job within their specialty defined by the contract.

Disciplinary Actions

Employees may be disciplined by their employers, including employment termination.

Contractors cannot fire subcontractors, although the contract can be terminated if the contractor is willing to pay the costs of a breach.

How to Hire a Subcontractor

If you need to hire a subcontractor for a job, there are some essential steps:

1. Define the Scope of Work

Before you look for a subcontractor, you must determine what they will do. A subcontractor needs to know what you want them to do so they can give you an accurate bid.

For instance, if you are remodeling a house, your subcontract for the roof should include the square footage, the materials you want to use, and the start and end dates.

2. Find a Subcontractor

In any industry, from construction to web design, the best way to find reliable specialists is to ask others in your field.

You should also look on review sites like Yelp and Google and see what their clients and customers say. Gather a list of potential bidders for your project.

3. Begin the Bidding Process

Contact your proposed subcontractors with your project outline and ask if they are interested in bidding. It would be best if you gave them a deadline for their bid (days or weeks, depending on the project size).

Their bid should include an approximate number of workers, materials needed, and other details.

4. Write the Agreement

Include all the essential details in a subcontractor agreement. Depending on the general contract, the subcontractor may be paid at the outset of their work, in installments according to the general contract, or upon completion of the entire project.

Insurance and materials deliveries should be spelled out in the subcontractor agreement and the primary contract.

What Should a Subcontractor Agreement Include?

A subcontractor agreement should include the following:

• Date of contract
• Primary or general contractor
• Subcontractor
• Detail of services
• Compensation
  • Date and type of compensation (i.e., in full, installment, upon completion)
• Reimbursement of expenses
• Term of service
• Termination
• Acknowledgment of independent contractor status
• Confidentiality clause
• Ownership of work product clause
• Insurance
• Non-compete/non-solicitation clauses
• Dispute resolution clause
• Contractor signatures
• Subcontractor signatures

How to Write a Subcontractor Agreement

Use this step-by-step guide to write your agreement:

Step 1 – Initial Details

Fill in the date the contract is created and the name and address of the general or primary contractor and subcontractor.

You should also include details of the services that will be provided. If the services can be described in a line or two, complete the section on the page.

If a more detailed description is needed, attach a second page with a longer description of the subcontractor’s duties.

Step 2 – Compensation

Subcontractor services may be paid according to the primary contract. Review each option and select:

Periodic Fixed Wage

The subcontractor will be paid a set amount on a weekly/monthly basis or upon submission of an invoice.

Set Fee

The subcontractor will be paid a set fee upon completion of the project or submission of an invoice.

Upon Completion of Certain Milestones

Large and some state projects are paid when the project reaches specific points in the project. The contractor will pay the subcontractor a certain amount upon completion of each milestone or receipt of an invoice following the milestone.

Step 3 – Term and Termination

Include the date the services will start and when the contract will terminate:

• After all, services are complete
• After a fixed period
• On a specific date, regardless of the completion of the project
• At will

Step 4 – Disputes

Specific types of dispute resolution may be mandated in your state. Choose the relevant dispute resolution:

• Court litigation. Disputes shall be settled by courts in the state of [State]. The prevailing party shall/shall not be entitled to recover fees and costs.
• Binding arbitration.
• Mediation.
• Mediation, then binding arbitration.

Step 5 – Miscellaneous

If you need to include any non-compete/non-disclosure clauses, expense details, or further information, then do so here. Finalize the agreement with the names and signatures of both parties.

Subcontractor Agreement Sample

Below, we provide a sample and a downloadable subcontractor agreement template in Word and PDF format.

Frequently Asked Questions