Subcontracting as a Convenience for a Client

Question: Have any of you subcontracted as a convenience for an existing client? In this case, an existing client just wants to pass some billing for a contractor through my company. This way, the client can avoid difficult internal paperwork to get a new contractor approved. The pass-through won’t affect the budget for the work I’ve been doing, and I’ll get a little markup for the billing effort.

I’ve subcontracted before, but only when the subcontractor was someone I needed to work with on a client’s project. In a situation like this, do I need any type of contract with the subcontractor? I have nothing to do with the actual work.

A few people had either done this before or been in the subcontractor’s position and the client company had hired them the same way (through a contractor) for similar reasons.

The majority of respondents favored a contract with the subcontractor.

A couple of people were worried about the ethics of helping someone get around their company procedure.

Some respondents had tips on accounting. Two mentioned that the prime contractor was incorporated. Others mentioned working as W-2, a temporary employee, instead of a subcontractor, which negates the need for a contract, but has overhead costs.

Here are some specific comments on this topic.

Make a Contract with the Subcontractor: Most respondents (7 of 13) expressed a need for a contract with the subcontractor even though the contractor would have nothing to do with the subcontractor’s work. The reasons are:

To ensure the contractor is not responsible for the quality or completion of the subcontractor’s work.
To ensure that if the client does not pay for the subcontractor, you are not stuck with the bill.

Nine respondents pointed out that the contractor would taking a risk by “hiring” the subcontractor.

Consider the Ethical Implications: Two respondents felt that helping the contact at the client company get around the company’s system for hiring contractors is not ethical and could cause the contractor problems.

Go For It!: Three respondents said that either they had hired a subcontractor to save the client the “hassle”, or they had been the subcontractor hired by a “prime contractor”. All of these respondents had been happy with the business arrangement. One of the contractors hired the subcontractor without an additional contract and said that as long as the extra income and the expenses matched, there would be no effect on income tax. There was some additional accounting work, and they had to make sure that the billing cycles matched so that the contractor did not end up acting as the client’s bank, unless the contractor charged for this service, too.