Business Tips

How to hire and pay subcontractors

Subcontractors play a vital role in construction. Even for smaller GCs, subcontractors can be more cost-effective than hiring new employees and bring the expertise you don’t have. Like it or not, as a GC you probably work with at least a couple of subcontractors on a regular basis. Once you’ve found a reliable sub, you’ll undoubtedly stick with them as long as you can.

You might be starting off and need to find someone good. Or sometimes subs will change their specialty or retire—and then it’s time to hire someone new. In either case, the below advice applies.

Start searching from a high-quality pool of subcontractors

Professional subcontractors belong to professional organizations like the Associated General Contractors (AGC), Associated Builders and Contractors (ABC) and American Subcontractors Association (ASA). Starting your search with an association’s member directory helps ensure you’re reaching only top-tier subcontractors.

Utilize your network

It’s possible you already know a good subcontractor or know someone who does. Ask businesses in your network who they’ve used in the past or if they’d recommend someone. Impressed with the work on another local project? Ask the contractor who they used. You can also take advantage of expos and tradeshows to expand your network. It’s probable that good subcontractors are already putting themselves out there, and you just need to open your eyes.

Put out a Request For Proposals

Once you narrow down your search to a couple of subs, send out a Request For Proposal (RFP) to your top choices. Not only are RFPs a formal invitation given to subcontractors to bid on your project but they give you an idea of how the project will run along with the final cost.

Prequalify your top subcontractor choices

Once you’ve found a top candidate or two, you’ll want to vet each one to make sure they’ll be a good hire. Prequalifying candidates helps eliminate safety, project and financial risks. Use these questions to help the process along:

  • Can this subcontractor scale with you?
  • Do they have experience?
  • Do they have a good safety record?
  • Are they licensed?
  • Will they communicate with you?

Paying Subcontractors

Now that you’ve hired a subcontractor, you’ll need to go through the steps to pay them.

  • The IRS requires employers to have subcontractors fill out a W-9. The W-9 provides you with the subcontractor’s Taxpayer Identification Number. You’ll also need to fill out a Form 1099-MISC to report any work you paid them over $600 for the year.
  • Get proof your new subcontractor is insured and bonded. Ask the subcontractor to send you copies of their insurance and bonds for your records.
  • And if you’re a federal contractor, you’ll need to use certified payroll. Certified payroll is a special payroll report contractors and subcontractors must submit when working on a government-funded project. While you don’t need certified payroll software, it not only makes the process easier but eliminates mistakes. ExakTime’s time tracking software helps construction companies accurately track every hour subcontractors work and classifies the time under the correct prevailing wage designation.

Whether you need help finding subcontractors or paying them, ExakTime offers a web-based workforce management system with payroll-syncing that’s simple and quick.

Don’t worry if your software will work with ours. We offer integration with QuickBooks and QuickBooks Online, Sage 100 Contractor & Master Builder, Sage BusinessVision and other valued partners—for seamless payroll processing. Our payroll syncing functionality:

  • Automates database transfer and system setup
  • Shares ExakTime Connect time tracking data with your payroll application
  • Exports attendance records in seconds
  • Ensures paychecks are accurate and on time every week
  • Frees time for other office responsibilities