Whilst there several advantages of being an employee in construction company its important to remember that being a self-employed, freelance or contract work has many benefits as well.
This article highlights important and often necessary considerations that protect contractors against potential pitfalls and situations where the wheels stop turning or even come off altogether.
Your income will be no doubt be affected so importantly by following the basic steps in this article will allow you, as a contracting professional, to perform you duties and tasks efficiently and safely to ultimately get paid.
Contractors may well be perceived as having less legal rights than employees within construction companies, however contractors still have laws and regulations in place that protect them in the workplace.
Knowing this means you do your job without fear or worry.
Contracts
As a construction contractor it may sound obvious but its essential there is always a contract with your clients for any given job or task.
The contract not only confirms the brief of a particular project or job but importantly protects you as it is a legally binding agreement.
As well as having a contract you should agree a full schedule of works for one or more tasks undertaken.
Contracts should contain the following information:
- Summarized project breakdown
- Your total charges for the project (including labor and materials supplied)
- Timeline for completion
- Termination terms
- Maintenance & Service terms
- Warranty/Guarantee and duration
- Payment terms (time-to-pay, deposits, deductions)
- Other worker rights (to be confirmed between you and the end-client – weekend work, overtime, holiday provisions)
Both parties must agree to all terms before any work is undertaken.
All too often projects begin without a formal contact in place…then the proverbial hits the fan with problems arising galore.
Differences of opinion, a change of mind halfway through or processes causing unforeseen issues, design edits or types materials being questioned, sudden budgetary caps brought into place, running out of money and the ‘not what was agreed’ line rearing its ugly head.
It all happens and can invariably result in bad harmony on site to even a termination of the job altogether and not getting paid.
Get a contact put in place and agree everything.
So. If you are tiling walls that need stripping, filling, plastering, sealing then re-tiling with 6 x 3” black & gold tiles using pink glitter grout in a shower room in the east wing of a country mansion make sure you confirm the brief with the client or whomever you’re subcontracting to.
Confirm all requirements and details exactly as specified in the schedule of works and make sure your contract correlates to this.
More information and pre-planning eliminates any guesswork.
Aside from your contract, you have a number of unique rights as a construction contractor.
Control
As a contractor, you are in control your hours of work, and quite often your place of work.
Depending on the type of work and whats agreed with a client or as subcontractor, you can negotiate whats completed where and when.
This doesn’t mean you can just rock up onto site as and when you feel like it.
As a professional you must adhere to the job spec and be mindful of the environment. Employing a certain degree of common sense goes a long way.
There are usually other trades working on the same project you’ll need to coordinate with.
Joinery and carpentry may depend on plumbing, flooring, painting or electrics to be fitted first.
Glass fitters may need all painting to be completed before they can continue.
You turning up unannounced can cause problems leading to confusion and more importantly pose health and safety issues. Another body milling about the place is generally frowned upon when people are attempting to crack on with work.
Agree everything with the client or company managing a project before you go on site outside of whats in your schedule.
Also, the client cannot also just demand your presence at certain times they perhaps could with an employee. Nor can they make special requests or demands of you that don’t fit within your contract or schedule.
As a contractor, you hold the right to complete tasks or projects within the remit of your own schedule – so long as it’s citied in your contract.
Remember, you are considered a professional in your field thus employed as one so you have a high degree of input as to your modus operandi. You operate as you see fit, and without the need for directional instruction from your client.
That said, you must always outline schedules, terms and circumstances that need to be agreed or adjusted in advance for there to be a smooth operations coupled with a harmony between trades.
Ultimately you want a successful relationship. This means good press and more work.
Payment & Invoicing
You have the right to determine how much and how you’re paid for the work you produce.
Outline your fees and mode of payment in your contract to ensure you are compensated fairly and fully for your work.
I’ve been in situations when clients withheld payment then attempted to pull a number of fast ones based on what they thought they wanted versus what was actually agreed.
If they have any issues or disputes refer to the contract – it will protect you.
For some jobs I’ve contracted, I’ve asked for a 40-60% retainer to confirm my appointment.
This was learned the hard way when a handshake agreement resulted in the purchasing of $700 of materials and labor only for the ‘client’ to back out a the 11th hour, then disappear altogether.
Sometimes you may be part-paid for items produced or throughout various phases of a project.
Thats fine but get it agreed.
I cannot iterate this enough but agree everything you can and get it formalized on your contract and/or schedule of works.
Get a deposit or retainer if you can negotiate one. Saves a lot of headaches.
Tools and Materials
Often a client will ask you to source and provide materials.
They may provide separate funds for this outlay but confirm it. Make sure everything has been agreed beforehand and does not come out of your costs or for services pertaining to labor.
Again, refer to the contract.
By rights, as a construction contractor you will should be using your own tools.
If you happen to use a tool or piece of equipment you don’t own, then later fails or gets lost/stolen you will be no doubt be held accountable. And highly likely out of pocket for repairs or replacement.
We never use other trades tools. I’ll happily watch a demonstration of someone showing us how its done to guide us with their own or demonstration equipment but its Murphys Law that the moment I pick it up the bloody thing will fall apart or will get accused of messing some settings up or something.
Invest wisely in tools specific to your trade – this is your bread & butter; your livelihood.
And insure all of your tools for both on and off-site use.
It’s blindingly obvious but worth repeating.
Multiple Projects and Multiple Clients
As a contractor, you have the right to work for more than one client at a time.
Unless your contract states you’re exclusively working on one project or a selection of specific tasks there’s usually no issue marketing your services to other potential customers while working for an existing client.
Of course its great to have loads of work on the go though be cautious of your resource pool and out-sourcing tasks to sub-contractors.
Don’t spread yourself too thinly and know your limits.
If you cannot take on more than you can chew, don’t. Jobs will come up again.
And if you are good enough, reliable enough and committed to producing high quality, you’ll get the gigs.
Ultimately the responsibility falls on you to coordinate and complete jobs as expected.
You reputation is at stake.
Subcontracting
As a construction contractor, you have the right to subcontract parts of your project to other companies or trades.
This may include subbing to contractors in your own trade or others such as electricians, plumbers, dry-wallers, roofers, and whoever you need to do a job.
There are usually 3 types of sub-contractor you may be part of:
- Domestic Sub-Contractor – appointed by the main contractor
- Nominated Sub-Contractor – selected by the client to carry out an element of the works
- Named Sub-Contractor – usually selected from a list of people provided by the client
Clients occasionally ask for work or specific tasks not serviceable by yourself; either its not in your remit or you just don’t have the resource at the time. Grab this opportunity to access your resource pool or black book of trades and see this as management role by supplying the client with sub’s who can work for you, do the job reliably and bring you extra revenue.
Again, ensure you have a clear contract in place outlining services, fees, payment terms, responsibilities and scheduling for the sub-contract, not just with the client but also those you are hiring to sub-contract for you.
Subcontractor Rights
Subcontractors are under contract by a general contractor who delegates the work based on the agreement with their client. Subcontractors may have interaction with the client however you should take instruction from the general contractor. Don’t get in to a situation where misinformation, misinterpretation or miscommunication becomes cause for questions. Confirm everything with everyone concerned.
Subcontractor rights are determined by the contract they are working under.
As a subcontractor you should make sure your contract outlines the project timeline, price, and contains an indemnity clause.
This clause prevents you from having any liability if the general contractor breaches their contract in any way. This way, you are only liable for your own actions, not theirs.
Insurance
As a subcontractor or contractor it is generally not required that you hold worker’s compensation insurance to cover yourself in case of injury.
Conversely, you are not entitled to employee worker’s compensation.
If you’re injured, all of your medical costs will fall to you.
Depending on your contracting business and nature of work its highly recommended you consider this actuality. On-the-job injuries can rack up serious medical bills.
The good news is that you do have options for insurance coverage as an independent contractor in construction.
Check with your state’s agency to determine whether or not insurance is required for contractors where you live.
Personally I believe insurance is a must-have. It can cover health, liability, tools and safeguard the longevity of your business.
It is vital to success and peace of mind. With any luck you’ll never need it but its there if you do.
Minimize risk.
Here is a useful link for a comprehensive guide to construction insurance
https://constructioncoverage.com/construction-insurance
Taxes
As an independent contractor or subcontractor you do not have an employer deducting taxes from your paychecks. Hooray!
Therefore, you are required to calculate and pay your income and self-employment tax by yourself.
Booooo…
It is a good idea to set aside money from each job throughout the year to pay your taxes. Depending how much you make, you may be required to make quarterly tax payments instead.
If you made more than $400 as an independent contractor, you are required to pay self-employment tax in addition to income tax. Self-employment income tax is around 15% of your net income, but it’s generally a good idea to save about 30% of your income for taxes.
Keep track of your expenses throughout the year as they’ll be used as deductions to your taxable income.
This will result in you owning less in taxes.
Get a good bookkeeper or an accountant to take care of this potential headache if you can afford to.
This allows you to concentrate on what you do best.
Links to government information:
US – https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
UK – https://www.gov.uk/what-you-must-do-as-a-cis-contractor
Australia – https://www.ato.gov.au/Individuals/Working/Working-as-a-contractor/
Canada – https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4110/employee-self-employed.html
Unions
As a contractor you are allowed to join a unit of independent contractors, or a union. These contractor unions function differently than employee unions.
Independent contractor unions can help you find jobs, further your education, and help you get health and workers compensation insurance. As a group, they also fight for the legislation that benefits independent contractors in your field.
Since contractors determine their own wages employers do not debate wage contracts with independent contractor unions like they do with employee unions.
Contractors are also not protected if they go on strike from work.
Here are some useful links for your perusal:
US – North America Building Trades Union
https://nabtu.org/
UK – Unite the Union
https://unitetheunion.org/
Australia – CFMEU
https://cg.cfmeu.org/
Canada – Canada Building Trades Union
https://buildingtrades.ca/
Summary - Pros and Cons of Contracting
I’ve contracted for a number of years in the capacity of a joiner.
Sometimes I worked directly with a client but more often than not I/the joinery firm I worked with at the time were sub-contractors to a larger, general contractor. We managed to forge an excellent relationship built on quality output and we’re even recommended as the ‘preferred contractor’ for this particular company. Quite an accolade considering the competition in this game.
Ultimately you want to build a tight ship to navigate the choppy seas.
So, in conclusion, what do you need to be aware of?
You have the control when it comes to determining how and when you work. Unlike an employee, you have a lot of control over your wages, your workplace environment, your hours, and many other aspects of your job.
If you finish a job quickly and under budget, you can possibly stand to earn more. This can be beneficial over a fixed wage and you could earn more over time the more efficiently you perform.
Unlike employees, contractors do not have any worker benefits such as sick days, vacation days, family leave, social security, or insurance. These are things you will must consider when creating a schedule and pricing your projects. You also need to keep a detailed record of your expenses and earnings. This can be time consuming but is essential to the operations of the business.
Contractors aren’t guaranteed an hourly wage.
If it takes you double the time you anticipated to complete what you believed would take an hour or less you’re still getting paid the same amount regardless.
Build up efficiencies and know exactly what you are doing.
Remember, construction contractors and subcontractors have certain rights in the workplace that are unique to their positions as contractors.
These rights also protect their general job functions.
Once you know the arena you’re operating in you can thrive being a contractor.
If you deliver whats agreed, and beyond, to a high quality and maintain good relationships with everyone, you will succeed.
Clients, general contractors, suppliers, logistics, repairs, service engineers and everyone else involved in the process will want to work with or promote you as being someone or a company they can work with.
Maintain harmony and invest in relationships.
