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Subcontractor Agreement Templates

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A subcontractor agreement is between a contractor that hires a subcontractor to assist in the completion of a project or service. The independent contractor will usually hold a contract for services with a client, most commonly in construction, and will choose to hire a subcontractor to finish a part or all of the services. The agreement should outline all duties, liabilities, and responsibilities of the subcontractor along with any other conditions.

IRS Form W-9 – Required to be completed by subcontractors to prove that the individual or entity is allowed to work by presenting their name and Social Security Number (SSN) or Employer Identification Number (EIN).

By Type (14)

Subcontractor Agreements By State

Table of Contents

How to Hire a Subcontractor (5 Steps)

A subcontractor is sought when an individual or company, known as the ‘independent contractor’, cannot perform the duties necessary to complete a project. This is common in construction when specialty tasks are needed to be completed in order for the entire project to be finalized. The agreement is between the independent contractor and subcontractor only.

Step 1 – Scope of Work

The scope of work is a term that is used to describe the exact specifications for a task that is to be completed by a subcontractor. This description will be needed when trying to find a subcontractor for a specific job.

For example, if a roofer is needed the exact type, square feet (SF), materials needed, and due date must be outlined in the scope of work.

Step 2 – Finding the Subcontractor

After the scope of work is specified, it’s now time for the independent contractor to find a qualified subcontractor to fulfill the job. The best way is to ask around or go on websites such as Yelp to find reviews. Once a select number of potential candidates have been found, it’s time to contact and see if they are interested in the work.

Step 3 – *The Bidding Process

*If the independent contractor already has a subcontractor in mind then they can skip this step.

The bidding process is when all potential candidates for the job are given the scope of work and are allowed to submit proposals on how much they will charge if they are given the work. This can take anywhere from days, weeks, or months depending on the scope of work involved (such as materials needed, number (#) of employees, etc.).

Step 4 – Writing the Agreement

When writing the agreement, the independent contractor and subcontractor will be obligated to come to terms over who is responsible for the following items:

  • Payment;
  • Materials;
  • Equipment;
  • Transportation/Travel;
  • Completion Date; and
  • Insurance (usually General Aggregate)

Before, at the time, or after the agreement has been signed the Subcontractor may have the right to view the Master Contract between the Independent Contractor and the Client (the Client is the party that hired the Independent Contractor). This is to confirm that the Independent Contractor will have the funds for payment at the end of the project.

Step 5 – Finalization and Payment

After the agreement has been signed the subcontractor will be able to begin work on the date set forth in the agreement. Depending on the payment schedule outlined, the subcontractor will be paid in full after the work has been completed to the approval of the independent contractor and the client (within industry standards). Afterward, the subcontractor’s work is complete and the agreement is no longer valid unless there are any warranties provided.

Employee vs Subcontractor

There are several differences between an employee and a subcontractor, most common of which are listed below:

Taxes

  • Employees have their taxes (state and federal), Social Security, Medicare, and all other employment-related taxes automatically withheld by the company they are employed with.
  • Subcontractors are solely responsible for filing their taxes. They would need to identify the amount they should withhold on their own and may need file taxes more frequently than a traditional employee (up to four times per year). This can be done by consulting the Internal Revenue Service (IRS) or a tax accountant.

Benefits

  • Employees are often offered benefits by a company (contractor), which may be inclusive of health benefits, assistance lines, life insurance, etc.
  • Subcontractors are not offered any benefits from the contracting company and therefore that will not be listed on the agreement.

Behavior

  • An employee is bound by the company’s policies and procedures for appropriate behavior, services to provide and their training.
  • A Subcontractor is responsible for behaving professionally and ensuring they bring the appropriate skill sets as needed. They are accountable for creating their own professional guidelines and abiding by them.

Additional differences can be found in the wages between an employee and a subcontractor, the schedules (where and when) and hours that are worked or opportunity to own into the business.

Filing Taxes (Form 1099-MISC)

IRS Form 1099-MISC is required to be completed by the contractor if there were payments made to the subcontractor in excess of $600 during the fiscal year. The contractor will be required to provide this form to the subcontractor by January 31 of the following year and file with the IRS by the last day of February.

The subcontractor is responsible for payment of their own State and Federal withholding taxes.

What NOT to Provide a Subcontractor

Due to the risk of the subcontractor being labeled as an employee of the contractor, it is best to avoid providing a subcontractor with the following:

Give Benefits – Providing benefits to a subcontractor should not be done. Each member of a company’s team should be accountable, which is needed for tax purposes and to ensure the company is abiding by the appropriate healthcare laws. Being that a subcontractor cannot be listed as an employee as well, the company must ensure they are listed as a subcontractor and not offer benefits. Benefits that should not be provided may range from healthcare, 401K, paid time off, sick time and so forth.

Provide Tools or Materials – The appropriately qualified subcontractor will not require additional tools and materials to be provided by the company in order to complete the task. They will be able to complete the work required as requested without additions. This would be included and detailed in the subcontractor agreement for full understanding as they would be expected to provide their own materials.

Pay their Taxes – A subcontractor has the responsibility to file and pay their own taxes. The wages that are made from the job are paid as a lump sum and are not required to have taxes be withheld by the contracting firm. The subcontractor will file IRS Form 1099-MISC.

Give Training – A subcontractor will be a fully trained professional with the capability to complete the task or job. The company is responsible for ensuring their employees are trained individuals, however, for work or assignments being sent to a subcontractor, it should require extremely minimal direction. The subcontractor should not require any additional training or be provided full training as their purpose is to provide a specific set of skills.

State Definitions

(Video) What is a Subcontractor Agreement?

How to Write a Subcontractor Agreement

Download: Adobe PDF, Microsoft Word (.docx) or Open Document Text (.odt)

1 – Save The Subcontractor Contract From This Page To Your Computer

The paperwork displayed on this page is available as a PDF or word processing file. Each button presented with the preview (PDF, Word, and ODT) will open the agreement as the file type it is labeled with. Open, view, then download this paperwork in the format you prefer.

2 – Both Parties Engaged In This Agreement Must Be Identified

The first article in this document will be labeled “I. The Parties.” Here, we will name the date attached to this agreement along with the two parties involved. Begin by reporting the calendar date associated with this contract. Document this paperwork’s contract date using the first two blank spaces in the first paragraph to present it.The first party we must define is the Contractor. This is the entity whose client contract is the basis for this paperwork and who intends to hire the Subcontractor we will define next. Use the first blank space after the term “…Is Between” to introduce the Contractor by inputting his or her full name. You will also need to supply the Contractor’s mailing address by producing its street address, city, and state on the three blank spaces (respectively) following the term “…Mailing Address.” Now, this paragraph will require the identity of the Subcontractor being hired in the manner defined by this agreement. Enter his or her full name (first, middle, and last name) on the seventh blank space in this statement. Continue identifying this party by documenting the Subcontractor’s street address, city, and state after the words “…With A Mailing Address Of.” Make sure to supply this information using only the last four blank spaces of this statement.

3 – The Client And Required Subcontractor Services Must Be Clearly Documented

The Client this document refers to is the entity that has hired the Contractor above. In the second article, “II. The Client,” we must identify this third party to supplement the language it contains. To accomplish this, we must produce the full name of the Client (as it appears in the agreement held with the Contractor) on the first blank space. Then, we will use the next three blank spaces to present the Client’s official mailing address. In the next article, “III. Services Provided,” the products or labor the Subcontractor must provide to the Contractor to satisfy this agreement should be detailed. Produce this information on the blank space that precedes the parenthesis label “Services.” In addition to solidifying the work the Subcontractor is being hired to do, we must further define his or her obligations. This will be handled in the article labeled “IV. Subcontractor Responsibilities.” You must place a mark in each checkbox that corresponds to a statement adequately defining what the Subcontractor must do to be paid by the Contractor. Place a mark in the first check box if the Subcontractor must supply “Labor,” the second check box if the Subcontractor must provide all supplies and products required, the third checkbox if the Subcontractor must furnish all the “Equipment” for this job, the fourth checkbox if the Subcontractor is responsible for all “Travel” upholding these responsibilities entails, and/or the last check box if there are “Other” obligations the Subcontractor is responsible for but have not been detailed above.

4 – Outline Some Basic Job Details

Naturally, work must occur at a location. The next section, “V. Location,” will require that we define where the Subcontractor is expected to be physically present when working for the Contractor. If this is a fixed location then mark the first check box in this section and fill in the street address on the first blank space, the city on the second blank space, and the state on the third blank space. If the location must be determined in the future (by the Contractor), then mark the second checkbox. This agreement will call for an official calendar date when the Subcontractor is expected to begin work. Record the month and two-digit calendar day of this start date on the first blank space in “VI. Commencement Date” then, record the two-digit year of this date on the second blank space.  We will also need to furnish the calendar date when the Contractor expects the Subcontractor to complete the given work assignment. Three check box statements have been included in “VII. Completion.” You must mark the check box that corresponds to the statement that best describes when this job should be finished. If there is a specific deadline for this assignment, then select the first check box statement. Note: Present the expected calendar date of completion using the two blank spaces provided after the words “…Specific Date Of” If there is a general understanding of how long the type of work being commissioned to the Subcontractor should take, then select the second statement “In Accordance With Industry Standards.” If neither of these statements applies, then select the check box labeled “Other” and use the blank space to define when and/or how this assignment should be considered complete. The payment the Subcontractor expects for completing this work by the deadline must be included in this document. We will tend to this task in article “VIII. Payment Amount” where one of three checkbox statements must be selected. If the Contractor will pay the Subcontractor a flat rate for the job, then select the first statement and supply the dollar amount constituting full payment on the blank space provided. If the Contractor will pay an hourly rate to the Subcontractor as he or she works on the project, then select the second statement and enter the hourly rate on the blank line preceding the term “Per Hour.” If neither of these statements adequately describe the payment the Subcontractor expects from the Contractor, then mark the third check box. This choice requires a report on what Contractor must pay the Subcontractor produced on the blank space that precedes the label “Payment.” Once we have defined what a full payment for the job entails, we must report on how this payment will be delivered from the Contractor to the Subcontractor. One of the three check boxes in the ninth article (“IX. Payment Method”) must be selected to report when and how the Subcontractor will be paid. If payment must be submitted from the Contractor “Immediately Upon Completion….” of the job assignment, then mark the first check box in this statement.  If the Contractor will have some time after the job’s completion to deliver payment to the Subcontractor. Then, mark the second check box and enter the number of days after the Subcontractor has fulfilled his or her obligations when the Contractor must deliver payment on the blank space provided. If the Contractor will pay the amount listed in the previous article on a regular basis to the Subcontractor, then select the third check box. Here, you will also need to report the frequency of payments by marking the check box labeled “Weekly,” “Monthly,” “Quarterly,” or “Other.” If you select “Other,” you must provide a description of how often the Contractor will pay the Subcontractor. If none of these statements describe the frequency of the Contractor’s payments to the Subcontractor, then mark the “Other” check box. If doing so, be prepared to report precisely when the Contractor must pay the Subcontractor to satisfy this agreement. 

5 – Provide Additional Information Applicable To The Subcontractor

The tenth article of this document (“X. Subcontracting”) will address the issue of whether the Contractor will allow the Subcontractor to hire others to complete the job assignment described here. If so, then mark the first check box labeled “Right To Subcontracting.” If the Contractor does not believe this would be appropriate, then mark the checkbox labeled “No Right To Subcontracting.” If the Subcontractor will possess the right to assign rights within this agreement or relating to the services provided to “… Heirs, Executors, Successors, and Assigns” then mark the first check box in the eleventh article (“XI. Assignment”). If not, then mark the check box that precedes the term “Shall Not.” The next article, “XII. Insurance,” will seek the insurance status the Contractor requires of the Subcontractor. If the Subcontractor must maintain insurance for this job, then mark the “Shall” check box and attend to the list below. If not, then mark the “Shall Not” check box. If the Subcontractor is required to maintain insurance, then we must provide some specifics using the check list provided. If the Subcontractor must maintain “General Liability Insurance” then mark the first check box under “A.) Coverage Types.” This requires a report on the dollar amounts for the “Combined Single Limit: Bodily + Property Damage,” “Personal Liability Injury,” “Aggregate For Products-Completed Operations,” and “General Aggregate” If the Subcontractor must maintain “Vehicle Liability Insurance” then mark the second check box. This requires the minimum dollar amount required on the insurance policy reported on the blank space provided. Mark the third check box if the Subcontractor must maintain “Excess Liability Insurance.” If so, then record the minimum amount the Subcontractor must have on the policy using the blank line after the dollar sign. If an “Additional Insurance Requirement” must be met, then mark the fourth check box. If this statement is marked make sure that both parties are fully aware of the conditions of its contents.

6 – This Agreement Requires Some Legal Definitions

At times, a misunderstanding or a dispute may arise between Contractor and Subcontractor. This paperwork will address this scenario in “XIII. Resolution Of Disputes.” If both parties must agree to “Binding Arbitration” to settle a dispute, then mark the first check box. If both must agree to a “Non-Binding Arbitration” process, then mark the second checkbox. If, instead, they must abide to a “Mediation” process then mark the third check box and indicate if they must enter “Binding Arbitration” or “Litigation” to settle the matter. Now, in the fourteenth article (“XIV. Termination”), we will need to supply some details on the manner this agreement will terminate. If this agreement must terminate only upon the successful completion of the terms documented and neither the Contractor nor the Subcontractor may terminate the agreement earlier than this, then mark the check box labeled “No Rights To Terminate.” If only the Contractor has the ability terminate this agreement prematurely then mark the check box attached to the label “Contractor Only Has The Option To Terminate.” Make sure to provide the number of business days the Contractor must give before the official termination as notice on the blank line after the words “… With At Least.” Also, make sure to record the percentage “… Of The Actual Cost Of The Completed Work” the Subcontractor may expect from the Contractor as compensation for overhead and profit. If only the Subcontractor will have the right to terminate this agreement, then mark the third check box (labeled “Subcontractor Only Has The Option To Terminate”). This description will require the number of business days’ notice the Subcontractor must give the Contractor before terminating this contract.

If “Both Parties Have The Option To Terminate” the terms of this agreement, then mark the fourth check box in this article and supply how many (business) days’ notice the terminating party must give before canceling the agreement on the blank line provided. The next article requiring information is labeled “XXXI. Governing Law.” Provide the name of the state that holds jurisdiction over this agreement and the work being done on the blank space after the term “…Under The Laws In The State Of.” 

7 – All Provisions To The Agreement Between These Two Parties Must Be Included

This contract must be an accurate report on the agreement between the Contractor and Subcontractor. If there are any terms, obligations, or conditions that must apply to these parties through this agreement that has not been reported in this document then utilize the blank lines in “XXXIII. Additional Provisions” to fully document such information. If you need more room, you can use your editing program to add more space or you may cite an attachment. Note: As per “XXXII. Attachments” make sure all such attachments are present at the time of signing.

8 – Both Parties Must Cooperate To Execute This Document

This template will only become a binding contract when both the Contractor and Subcontractor have read the final product, reviewed any and all attachments, and sign their names to the bottom. Once both these parties are ready to complete this task of execution, the Contractor will have the first area at the end of this document for his or her use. He or she must sign the blank line labeled “Contractor’s Signature” then supply the “Date” when this signature was submitted. He or she must also print his or her name on the line below and report the full name of his or her Company on the “Company Name” line. The Subcontractor will also have an area to tend to as well He or she must sign the blank line labeled “Subcontractor’s Signature” and enter the “Date” of his or her signature on the next blank space. Below this, he or she must submit his or her printed name on the “Print Name” line and enter the name of his or her Company on the last blank space. 

 


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