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 is 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. We also provide a number of subcontract agreement templates to help you put it all together.
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. Consider these definitions of contracting and subcontracting.
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: After a client hires an agency, 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. They are often called subs, because they are under the original organization or person that was hired. The original organization or person is sometimes called the primary or the prime.
As freelancers, we may be subs to an agency who owns the relationship with the client.
But increasingly, freelancers are becoming the primes. We are acting like general contractors, taking on a project bigger than we can handle ourselves and then hiring other freelancers as subs in order to deliver on the contract to our clients.
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. That puts us in the position of managing other people and managing resources.
It’s also useful here to think about the difference between a freelancer and a consultant. There is no bright line distinction, but as we discuss elsewhere, freelancing generally refers to creative work such as articles, design, photography or software code, and consulting generally refers to planning, management and strategy services.
Naturally, most of our contracts straddle work on both sides of that line. But the more you take on work that requires subcontract agreements, the more you are moving into the consulting role.
The Government Publishing Office further defines 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 we mentioned earlier, we in effect become a client to other freelancers and many of us are not used to this new position of responsibility. All the stuff about clients that annoys you like unclear assignments, change orders and fuzzy payment terms? You are now potentially the one annoying your subcontractors.
Related reading: Better Protect Your Time and Work with a Client Sign-Off
The points below will get you thinking about the new factors you need to consider now that you are in the role of a client.
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 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. Therefore, you need to make sure that you can end your agreement with them in a reasonable time to control your expenses.
• Work for hire clause: We’re used to seeing this directed toward 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 agreement include reimbursement 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 subcontract agreement?
• Does the subcontract agreement acknowledge authorship of their work?
• When does the sub agreement end?
• Which factors terminate the subcontract 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 client mix and need to adapt to the new demands these new projects require. Maybe as a software developer for hire, you’ve taken on a product development job, so you will need to bring in some other freelance coders and UX designers that you subcontract to. Or maybe you are a graphic designer who has been asked to be the freelance art director, so you will need to sub to other designers and photographers.
While the terms below won’t apply to all clients, 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?
• 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
We’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.
Review it thoroughly with your attorney before using it and revise to it suit the needs and conditions of your project.
Other good subcontractor agreement templates to review:
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
U.S. Department of Health and Human Services offers a comprehensive explanation of “business associate contracts” in the delicate of health information privacy.
The National Academies of Sciences, Engineering and Medicine has templates for subawards and amendments for government grants and contracts.
Society of Human Resource Management (aka SHRM) provides a bare-bones contractor agreement.
AIGA provides an excellent workbook and toolkit to create contracts and agreements for designers.
The Printing Industries of America has an easy-to-read template for subcontractor agreements. This one clearly covers the issue of non-compete clauses.
Teaming agreements are a variation on subcontracting, particularly when it comes to bidding on government contracts. Check out this template for how to organize that.
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. 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 subcontractor agreement 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 own customized subcontractor agreement.
Ben Shanbrom is a freelance writer, musician and copy editor who works with artists and clients within his native New Haven scene and well beyond.