Subcontracting is a heck of a way to grow a freelance business and move beyond the limitations of hourly rates and billables. But as with many aspects of the solo career, thorough documentation and foresight are crucial to reducing the headaches. This is where the value of the subcontractor agreement comes in.
We recently discussed how important it is for freelancers to protect their reputations and assets with a well-crafted freelance contract, and the same wisdom applies to subcontracting. When we subcontract, we become both a service provider and a client by extension — this gives us a unique opportunity to earn more money while shouldering less busy work, but it also means we have to be doubly vigilant in our record keeping to avoid complications.
This post will give you a clear breakdown of the language you need for your subcontractor agreement and a number of useful templates to help you put it all together.
Is subcontracting right for you? Looking to get started? Check out our Ultimate Guide to Hiring Subcontractors
A quick refresher: What’s the difference between contracting and subcontracting?
This may sound obvious, but let’s make sure we’re on the same page before going any further.
Contracting: a client hires a consultant or freelancer for their expertise or ability to carry out specific projects. The relationship exists directly between the client and independent contractor.
Subcontracting: a client hires an organization, company, or freelancer. The hired entity pays other independent contractors to complete various pieces of the work detailed in the client’s scope of work. In hiring subcontractors to scale our businesses, we become “middle men” who oversee the relationships between our clients and the additional talent they need to get their work done.
The Government Publishing Office further distinguishes consultants as providers of “services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the contractor.”
Subcontractors by comparison are general service vendors who function as an “extra set of hands” under a contractor or other subcontractor.
What’s different about the subcontractor agreement
You’ve probably noticed that many subcontractor agreements are tailored to different industries (and plenty of them concern construction, which generally isn’t relevant to many of us as freelancers).
The simple fact is, in most cases, your subcontractor agreement will be quite similar to your freelance contract, and many standard independent contractor agreements can be easily converted into subcontractor agreements with the inclusion of just a few additional points.
Many of the differentiating terms come from the shift in roles that takes place when we subcontract. As I mentioned earlier, we in effect become a client to other freelancers and many of us are not used to this new position of responsibility. The points below will get you thinking about the new factors you need to consider.
Terms unique to the subcontractor agreement:
• No breach of contract clause: Are any of your potential subcontractors working for an employer who might contractually prevent them from working with you (or cause you harm for hiring them)?
• Necessary conditions for starting work: If one of your clients requires errors and omissions insurance, are your subcontractors covered or will they commit to be by a certain date?
• Terms of payment outline (how and when): You may not wish to pay your subcontractors in the same way you ask to be paid. What do you deem to be a fair, scalable compensation format for them?
• Termination clause (at your client’s request): It’s important that your subs know that, while they are ultimately accountable to you, your client holds the right to terminate your work with them at any time.
• Work for hire clause: We’re used to seeing this directed towards us, but don’t forget to apply this same clarification to the subcontractors in your agreement — things can get very messy otherwise!
Bare essentials of the subcontractor agreement
These are the real meat ‘n potatoes terms for any good subcontractor agreement (and most good freelance contracts as well). These items set the basic expectations on both ends and offer you and your subcontractors some needed security and organization:
• Which state is the subcontractor agreement being used in?
• Who is providing the service?
• Who is receiving the service?
• What service/services are being provided?
• What is the payment structure?
• If payment is on an hourly basis, what is the hourly rate?
• Will the subcontractor be reimbursed for expenses? If so, which qualify?
• Does your subcontractor require a deposit?
• When do you pay your subcontractor/how often?
• Do you need to provide the subcontractor with any services/resources for them to carry out their work, when do you need provide them with these resources? You may need them from your client.
• Who will own the work under this agreement?
• Do your subs get any kind of public authorship of their work?
• When does the agreement end?
• Which factors terminate the agreement — can either party do so at any time? What are the ramifications?
• What is the signing date?
Pro Tip: Use your clients’ contracts or statements of work as a reference point. Make sure you have the right terms to fit the unique conditions of your individual subcontracting projects by referring back to the documents you signed for each respective client. Which conditions in these items will you need to include in your subcontractor agreement?
More nuanced points
Many of us begin subcontracting because we’ve upgraded our clientele and need to adapt to the new demands these higher tier clients require. While the terms below won’t apply to all clients in this realm, these are good points to think about, especially if you’re looking to work with Fortune 500 companies, large organizations or publicly funded entities.
• Is a confidentiality clause necessary?
• Will a no-compete clause be necessary? (not often the case)
• Will a no-hire clause for your other subcontractors or client’s employees be necessary? (could a high level subcontractor you work with be tempted to hire other members of your team or your client’s employees?)
• Who is legally liable to the client for underperformance?
• Does the subcontractor need insurance?
• Will an A-133 audit be necessary? (Is one of your clients a city/state/nonprofit working with 500,000 of federal funding each year? If so the government wants to know exactly where the money is going).
Our subcontractor agreement template and other good ones to explore
I’ve put together a basic subcontractor agreement template below that you can download, plug your necessary information into and use immediately as a valid contract.
I do recommend you review it thoroughly before using it and add your own necessary terms to it suit the needs and conditions of your project arrangement.
Other good subcontractor agreement templates to reference:
Independent Consulting Bootcamp‘s Subcontractor Agreement
Stanford University‘s Subcontract Agreement
Portland VA Research Foundation‘s Independent Subcontractor Agreement
National Institute of Governmental Purchasing‘s Subcontractor Agreement
Same Day Transcription‘s Independent Subcontractor Agreement
For best results, customize your subcontractor agreement
Let’s be clear — you don’t need to start from scratch; a “from the ground-up” job will be very time-consuming and may not be as thorough or precise as industry standard calls for. A subcontractor agreement template that you’ve familiarized yourself with will more likely than not get the job done. But, as I’ve hinted, you need to at least make the contract your own.
It goes without saying that no two subcontracted projects are exactly the same and you will need to take the unique elements in your scenario into proper consideration in your subcontractor agreement.
Get started now:
- Begin with either our template or one of the others provided above.
- Fill in the necessary information in the prompted areas.
- Make a list below it of important factors you don’t feel are covered in it.
- Craft the necessary language you need to accommodate these additional terms.
- Work these terms into your customized subcontractor agreement.