It is important to understand the difference between a contractor and a subcontractor. In many cases an organisation will employ a contractor to complete certain tasks or duties for a specified period.
What is the difference between a contractor and a subcontractor?
Who is a contractor
A contractor is not deemed as an employee of the organisation. However, the contractor is an independent person, who will perform duties for the organisation. The organisation and the contractor will have an agreement between themselves detailing the specific requirements of the job role and the remuneration the contractor will receive for his duties. For a contractor to effectively fulfil his duties drawn out in his agreement, a contractor may be required to employ a subcontractor.
Who is a subcontractor
A subcontractor is a person who specialises in certain key areas which the contractor may not have sufficient experience in. The contractor employs the subcontractor to provide the him with additional benefits or skills necessary to fulfil the tasks and duties specified in the agreement between the contractor and the organisation.
Why do contractors employ subcontractors?
The main reasons why contractors employ subcontractors is because they can minimise costs and to alleviate the risks associated with the project. With the contractor and subcontractor working together in this way the contractors output to the project would be more efficient and provide a better service than the contractor could have provided by himself.
The contractor and the subcontractor will also engage into an agreement. The agreement will also outline the rights, obligations, and duties of both parties like the agreement which the contractor has with the organisation. An indemnity clause should be inserted into the agreement confirming that the subcontractor is not liable for any breach of agreement that the contractor commits and the subcontractor is only liable for his own actions. In most cases, the contractor is responsible for paying the subcontractor.