Introduction To Subcontracting
Kirjoittanut: Peetu Nieminen - tiimistä Crevio.
What is subcontracting?
A subcontractor is a business or a person that undertakes work for a company as part of a larger project. A subcontractor carries out the work that the primary contractor is responsible for but cannot necessarily perform. The primary contractor is responsible for overseeing the project and ensuring that the work is carried out on time, within budget and to the required standards. A subcontractor can be useful in the case that the work is outside of the primary contractor’s capacity or expertise. A subcontractor provides their services under a contract for service. Subcontractors are a separate entity from the primary contractor. Subcontractors aren’t a part of the primary contractor’s business, but they represent the company with their work. Subcontractors are responsible for their expenses, possible equipment and materials required to complete the work.
When to subcontract?
Subcontracting can be a beneficial solution for a company in many ways. Subcontracting is often less expensive for the primary contractor, since they aren’t responsible for paying the workers compensation benefits, insurances, etc. Outsourcing through subcontracting can be thought of as a variable cost that only occurs when the work is needed, whereas hiring full-time employees is a fixed cost that occurs whether the work is available or not. Therefore, subcontracting offers companies the ability to scale up or down their operations based on the demand. It also gives companies the opportunity to focus on their core strengths, while outsourcing the tasks that they don’t have that much experience in.
What are the downsides of subcontracting?
Subcontracting poses some potential risks as well. From the primary contractor’s perspective, there is a risk that the subcontractor may not have the same standards and commitment as the primary contractor, posing a risk to the quality of their work. Communication can also be affected by the fact that the subcontractor is an external factor to the primary contractor, which can limit their control over the project. It’s also important that both parties are aware of the obligations and understand what is expected of them. Having in place a well-written, clear, and concise subcontract that details the obligations of all the parties is the foundation of every successful subcontracting relationship. It’s also worth noting that subcontractors will have to be flexible with the people that they work with, since work environments may change more frequently.
Before writing this essay, subcontracting was unknown to me on a theoretical basis. I wanted to explore the information about subcontracting, because I feel it could be a beneficial way to gain experience in different sorts of fields, without having to start from scratch. I now see subcontracting as a problem-solving tool. The primary contractor has a task that they need help with and you as the subcontractor are the solution to that problem. Through subcontracting, I feel it will be easier to co-operate with larger companies and get a glimpse of their methods and ways of operation that you might be able to later incorporate in different ways. Sub-contracting would also be a beneficial way to exploit your expertise and find clients that might need an expert in a field that you’re already interested in. However, I think clear communication is the foundation for a successful experience in subcontracting. It’s important for both the primary contractor and you to understand what kind of skills and tasks are expected from you and that your expertise matches the contractors’ expectations.
Nonetheless, I feel that subcontracting can offer several benefits for companies as well as the subcontractor. Companies will gain access to fields of expertise they might not possess as well as several benefits including cost savings, flexibility, improved efficiency, and reduced risk. Therefore, I think that primary contractors should carefully evaluate their options and establish clear guidelines and communication channels to ensure successful collaboration with subcontractors. As a subcontractor, it’s important to weigh your options and choose the companies that fit your values. It’s also important to understand the value of your work and being aware that you are responsible for managing your time and effort. I believe that sub-contracting can be an important tool to utilize when beginning your journey as an entrepreneur.
Indeed Editorial Team. (2023). How does subcontracting work? A comprehensive guide. Accessed 27.4.2023.