How Does a Subcontractor Get Paid?

Builders often subcontract with electricians instead of keeping them on staff.

Builders often subcontract with electricians instead of keeping them on staff.

Subcontractors basically perform work for a contracted amount of money. They are not employees, and they don't always pull in a predictable paycheck and fringe benefits. On the other hand, they usually get to choose the jobs they take, how much to charge and how the payment arrangements should be handled.

Installments

In their work contract, subcontractors can opt to accept payments in installments. This is usually done for large jobs that span several weeks. The subcontractor might insist on a percentage to be paid up front cover material costs. Other payments can be hitched to productivity benchmarks every week, two weeks or month. The final installment is typically paid after the client signs off on the work.

Per Piece

Subcontractors also can work on a per-piece basis, meaning they get paid for each piece of work they complete. For example, a subcontractor who installs doors for a builder will be paid for each door that is successfully hung, or a hair stylist might be paid for each haircut she does. When paid by the piece, subcontractors often prefer to be paid often, sometimes daily or once per week.

Lump Sum

Depending on the scope of the contract, the subcontractor might agree to accept a lump-sum payment when the work is completed. Because a subcontractor must cover all costs associated with the job before getting paid, waiting for a lump-sum payment agreement can create a financial hardship for the subcontractor. Also, it can become a bigger problem when the client refuses to pay, either because he's unhappy with the final product or if he no longer has the money. Or, it could happen that the client pays the general contractor but the general contractor refuses to pay the subcontractor. A subcontractor has legal remedies, including filing a lien against the client's property -- usually called a mechanic's lien -- and taking the client or general contractor to court, depending on the type of work you performed. But these avenues take time and cost money, as well. Savvy clients include contract clauses that waive the right of the subcontractor to sue them, making sure the subcontractor only goes after the general contractor if he doesn't get paid.

Payment Contracts

Regardless of what type of job, big or small, you are completing for a client, always get a signed contract that spells out the exact scope of work, the amount of pay and how often you are to be paid. Even if you have a long-standing relationship with a client, the contract gives you protection if the client starts asking for additional work without additional pay or wants to wait until the job is finished to pay when you prefer weekly installments. If you typically perform the same job on a regular basis, such as mowing the lawn around a business every week, make the contract open-ended, saying the terms stay in effect indefinitely, or until the contract is ended by either party. This gives you the protection you need to make sure you get paid without having to draw up a new contract each week.

 

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