Contractor VS Subcontractor: What's the Difference?

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Contractors and subcontractors are the two professionals needed for small and big projects. For example, a cabinet maker might be hired as the contractor for crafting the expensive cabinets of a hotel. And in case this cabinet maker doesn’t do an installation, then a cabinet installer might be hired as a subcontractor. 

You may be thinking about taking on one of these roles yourself or maybe you want to start your own business and need to know what you have to have in place before you do. Either way, there are certain liabilities involved in the construction project, IT project, or any other undertaking, and securing the right insurance can make sure both you and your small business are protected. The first matter of business is to understand contractor vs subcontractor and dive deeper into what’s the difference. You can then decide on how you can better protect yourself as a contractor or subcontractor for masonry, electrical installation, app development, or any other projects.

Contractor vs Subcontractor: A Quick Look

Here’s a table that summarizes the difference between a contractor and a subcontractor:

What is a Contractor?

So what is a contractor? When you think of a contractor you’re right if you picture a plumber or an electrician. But note that the term doesn’t apply to professionals in the construction industry. In reality, contractors are persons or companies that apply for a project contract posted by construction firms, IT firms, and other big businesses. These contractors can then receive compensation for the work done. Moreover, contractors may also hire subcontractors to meet deadlines or ensure the quality of output. Aside from asking what are contractors, you should also wonder what they do in practice. There are four basic functions a contractor has, which are as follows:

• Establishing and securing a contract-All contractors must bid for a project, which entails marketing services by showing a work portfolio and price range. Once a contract for the work is in place, then you can get started tackling the project

• Providing advice-Contractors provide advice on how a project should be done in the most efficient, effective, and safest method possible

• Handing over a finished project-Contractors are also in charge of delivering a finished project to the client. They also conduct evaluations to test the completed output before informing the client that it’s ready to be utilized or released

The contractor is the one ultimately responsible for delivering the final project and managing it to completion. Usually, a contractor will oversee the entire project even though they have most of their experience in a single trade. This is the point where they may reach out to a subcontractor for assistance.

Subcontractor Definition: What is a Subcontractor?

A subcontractor, on the other hand, is someone who will help a contractor complete a certain project or job. They can be companies or individuals who the contractor reaches out to and hires for assistance.

All hired help for a project can be considered subcontractors meaning that developers, consultants, and skilled professionals commonly working on behalf of contractors are perfect examples. Here are the most common types of subcontractors:

• Electrical installation subcontractor

• Flooring subcontractor

• Roofing subcontractor

• Programming and app design subcontractor

• Structural subcontractor

• Carpentry subcontractor

• CCTV and alarm subcontractor

For an easier explanation on what is a subcontractor, the subcontractor will report directly to the contractor. The most common subcontractor responsibilities are as follows:

• Craft designs and submit them to the contractor for approval

• Ensure that projects are undertaken in accordance to the approved design and specifications of the contractor

• Meet deadlines and other milestones according to the plans set by the contractor

Contract Labor vs Subcontractor 

Additional terms you may hear thrown around in the business are contract labor and subcontractor, so what’s the difference? Typically, contract labor is when a contractor works within a signed agreement to deliver a completed project to a client. They are in charge of the logistics and materials and need to figure out labor needs and get the help they require to get it done. 

A subcontractor is going to carry out the work for the contractor and can either be part of a business or work on their own independently. Remember that these individuals or businesses have made agreements and arrangements with the contractor, instead of with the client or homeowner directly.  

Prime Contractor vs Subcontractor

A prime contractor enters into project contracts provided by government agencies. He or she supervises the hiring of subcontractors, conducts evaluations, and controls the flow of materials and goods during the project.  On the other hand, a subcontractor is an entity hired by a prime contractor. He or she undertakes the specific tasks assigned and informs the prime contractor of their completion.

General Contractor vs Subcontractor

In construction, a general contractor is a person or company that oversees the overall completion of a project. The management of finances, construction resources, evaluation of plans, and employee safety can fall on the shoulders of the general contractor aside from the employer. 

On the other hand, subcontractors are entities hired by a general contractor to complete a particular task involving the construction project. Electricians, plumbers, carpenters, roofers, consultants, and other types of extra help can be considered as examples. 

Difference Between Subcontractor and Independent Contractor  

You may have also heard someone addressed as an independent contractor on a job site. An independent contractor is a professional hired by a company to do a particular task. Otherwise called freelancers, independent contractors are hired on a per-project basis or as long as they’re needed. Subcontractors get a job if they’re hired by contractors. To make the distinction between subcontractor vs independent contractor easier, you can say that an independent contractor is similar to the usual contractor in that he or she is directly hired by the company whereas a subcontractor isn’t. 

Small Business & Contractor Needs 

As a business owner or contractor who needs to hire help and workers, or subcontractors, to complete a job, you’re setting yourself up to take on extra risk. The reason is that you have liabilities with the client now and also with your subcontractors. What if they make a big mistake or get you into hot water? It’s vital you have the right insurance policies in place to protect yourself and your business if a problem should unfold. Contractor insurance can put your mind at ease and ensure that you can remain in business even if there is an issue to manage.  

Liabilities & Securing the Right Insurance  

The next matter to address is regarding what liabilities contractors have in the first place. In the instance that you don't have insurance, you may then be liable for a lawsuit that comes your way due to your work or mistakes. 

It can be anything from a workplace accident to poor results or even illegal behavior that occurs under your watch. Also, you may not secure a contract or job in the first place because most homeowners and commercial building owners will ask to see proof of insurance before they will even consider hiring you for a job. 

As a contractor, here is what you’re going to need and secure before you try to win new business: 

• General liability insurance  

• Marketing strategy 

• Registration and certification or licensing 

The primary reason you need insurance is that the construction business and industry is a risky field and role in general. There are always dangers present given the physical nature of the job and the different conditions and job sites you’ll be working within.  Third parties can sue you for things such as bodily injury, personal injury, and property damage, for example. There are different options and packages to choose from that will protect you against such perils. Here’s a table below that shows what policies to get and the amount of coverage we recommend: