It takes time to make sure every aspect of each subcontractor agreement is accurate, but it’s not something any construction company can afford to miss.

There was a time when a ‘subcontractor agreement’ was little more than a casual reference from someone you knew, and a firm handshake.

Labour shortages were rarer than an appearance by Halley’s Comet, so if someone’s work wasn’t up to scratch, or their time-keeping was poor, they could easily and swiftly be replaced.

And because most construction workers had been at their trade for many years, if something needed fixing, someone else could step in to help.

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Defective work on-site can end up in the courts

Times have changed though, and such traditional recruitment methods contain many risks, not least that an individual’s defective work might lead, not just to delays on-site, but ultimately to legal action by a client, supplier, building inspector or anyone else involved in the project.

If every element of a subcontractor agreement isn’t checked and accurate, potential risks could arise to the main contractor’s finances, their reputation and the business itself.

Even the most able QC couldn’t defend a company against the outcome of shoddy work, by telling a court that the individual concerned had been taken on because they’d been highly recommended by a third party.

Of course, as the economy begins to pick up, and many skilled trades are in short supply, it is tempting for employers with a fast-growing workload to take on people with less experience than would be ideal, or even newcomers to the construction industry. This makes detailed checks of each subcontractor agreement even more important – in particular, making sure that each one has adequate insurance, especially for public liability. Such concerns are considered here through a Zurich event involving the Royal Institute of Chartered Surveyors (RICS), and though the former will inevitably highlight insurance issues, the points are still well made and focus on worries around an increased risk of defects and safety lapses as pressures to meet increased demand take hold.

The most efficient way to ensure that every subcontractor agreement contains comprehensive and current insurance cover, is to park copies of their documentation inside a construction management software system.

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A solid subcontractor agreement safeguards both parties

It might be of course, that some new recruits wonder why such checks are necessary, so it’s worth explaining at the start of the process that it’s a safeguard for all involved – not least as the software will generate automatic policy renewal reminders – a major plus-point for any self-employed subcontractor.

A rock-solid subcontractor agreement is a major benefit, not just for the main contractor, but for the individual.

Just as employers want to avoid risks caused by taking on the wrong person, subcontractors want to feel they are being protected from risk when they go on-site.

There have been horror stories in recent months of subcontractors losing out as main contractors over-trade, and even of the former issuing seven-day notices to companies suffering cash flow problems, but still going unpaid.

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Only 10% of freelance skilled trades are being paid within 30 days, which highlights the logic of good employers stressing the two-way merits of a comprehensive subcontractor agreement.

The best route to harmony, on site and in the office, is when both employers and their subcontractors feel protected from their respective risks.

Takeaways:

  • Check that your subcontractor agreements are watertight
  • Make sure your recruitment process checks subcontractor insurance
  • Ask who monitors insurance policies to ensure they’re renewed
  • Make sure every subcontractor realises the agreement protects them too.

Keep tighter control of your finances with The Cash Flow Efficiency Flowchart. Download your eGuide today.

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