Subcontracting is the practice of assigning or outsourcing part of the obligations and tasks under a contract to another party known as a subcontractor. A subcontractor is a person or business that undertakes to perform part or all of the obligations of anothers contract. Subcontracting is prevalent in areas where complex projects are the norm, such as construction and information technology. Subcontractors are hired by the projects general contractor, who continues to have overall responsibility for project completion and execution within its stipulated parameters and deadlines.
Subcontractors may be engaged for fixed-term contracts, task-based contracts with no specified end date, or long-term assignments. A subcontractor provides their services under a contract for service, which is a legally binding agreement between a business and a self-employed individual. Subcontractors are not part of the hiring companys business, and the hiring company does not manage or supervise them, provide instructions on how they should perform their work, or have line management responsibilities over them.
Subcontracting offers several advantages for small businesses, such as freeing up time and resources to enable the small business owner to concentrate on making money and growing the business. However, subcontracting also carries risks, such as compliance risks. To be safe, a small business may wish to include some factors in the contract provided to subcontractors, such as specifying a certain amount of work to be performed by a given deadline, but not specifying how that work should be performed in terms of working hours or tools and materials used.
In summary, subcontracting is the process of assigning or outsourcing part of the obligations and tasks under a contract to another party known as a subcontractor. Subcontractors are hired by the projects general contractor, who continues to have overall responsibility for project completion and execution within its stipulated parameters and deadlines. Subcontracting is prevalent in areas where complex projects are the norm, such as construction and information technology.
