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Using subcontractors without losing the thread

Subcontractors are how a small firm takes work it could not otherwise take: the second team for a big install, the specialist for one part of a job, the cover for a busy fortnight. The work is straightforward. What goes quiet is the paperwork on both sides of it.

You become a contractor, with obligations

Once you are paying someone for construction work, the Construction Industry Scheme is likely to apply to you as the contractor — verifying them, deducting at the right rate and giving them a statement. That is a duty, not an option, and getting the rate wrong is your problem rather than theirs. The rate is 20% for a subcontractor registered with HMRC, 30% if you could not verify them, and 0% with gross payment status, and it comes off the labour element only — never off materials, VAT, plant hire or the CITB levy. Verify before the first payment, not after. The mechanics from the other side are in CIS for subcontractors.

Agree the shape before the work

• Day rate or priced work — and if priced, priced against exactly what.
• What happens when the job overruns, and whose overrun it is.
• Materials: who buys them, and at whose margin.
• What counts as done, and who signs it off.
• Their insurance and their certification, seen rather than described.

The record has to look the same as your own

This is where firms lose money quietly. Subcontracted work often sits outside the system — hours by text message, materials on somebody's account, a job sheet that never arrives. Then the job cannot be costed, the variation cannot be evidenced, and the customer query has no answer. If subcontractors book time and materials against the job the same way an employee would, none of that happens.

Day rates hide the same problem as hourly rates

A day rate that looks cheaper than employing someone often is not, once travel, waiting and the work that has to be redone are counted. The only way to know is to cost the jobs — see what the job actually cost — with subcontracted labour in the figures rather than alongside them.

The customer sees one firm

Whoever is on site is you, as far as the customer is concerned. The job sheet they sign, the way variations are raised and the certificate they receive should look the same regardless of whose van it came in. That is easier to achieve when there is one system than when there are two ways of doing everything.