How to hire subcontractors safely in the UK

Taking on subcontractors: the right way

Growth hits a point where you cannot do everything yourself. Taking on subcontractors lets you deliver bigger projects, take on more work, and start building a proper business rather than being a one-person operation. But hiring the wrong subcontractor can destroy your reputation, your finances, and your relationship with your customers.

Subcontractor vs employee: get this right

HMRC is very particular about the difference between a subcontractor and an employee. A genuine subcontractor:

• Controls how, when, and where they do the work
• Can send a substitute to do the work
• Provides their own tools and equipment
• Can work for other clients simultaneously
• Is not entitled to holiday pay, sick pay, or pension contributions from you
• Invoices you for completed work

If you tell someone what hours to work, provide all their tools, and they work exclusively for you, HMRC may reclassify them as an employee. That makes you liable for their PAYE, National Insurance, and any employment rights they should have had. The penalties are severe.

CIS: your legal obligations

If you are a contractor in the construction industry, you must register with the Construction Industry Scheme (CIS) and make deductions from payments to subcontractors who are not gross payment status registered. The standard deduction is 20% (30% for unverified subcontractors). You must verify each subcontractor with HMRC before paying them and submit monthly CIS returns.

CIS applies to construction work including building, repairs, decorating, demolition, and installation of heating, lighting, power, and water systems. It does not apply to architecture, surveying, or professional services.

Due diligence before hiring

Before you let anyone work on your jobs:

• Check their insurance. Ask for a copy of their public liability insurance certificate. Verify it is current and covers the type of work you need.
• Verify qualifications. Gas Safe registration for gas work, NICEIC/NAPIT for electrics, CSCS for construction sites. Ask to see cards and check online registers.
• Check references. Ask for two or three recent references from other contractors they have worked with. Call them.
• See their work. Visit a current or recently completed site if possible. Photos are not enough.
• Get their UTR and NI number. You need these for CIS verification.

Written agreements

A written subcontract agreement protects both parties. It should cover:

• Scope of work (what they are doing)
• Programme (when it needs to be done)
• Price (day rate or fixed price)
• Payment terms (when and how you will pay)
• Insurance requirements
• Quality standards
• Defect liability period (typically 6 to 12 months)
• Termination provisions

You do not need a solicitor. A clear, plain-English document that both parties sign is sufficient for most domestic and small commercial work.

Managing subcontractors on site

Your customer hired you. If your subcontractor does poor work, leaves a mess, or does not show up, it is your problem. Set clear expectations from day one: start times, site rules, quality standards, and how defects will be handled.

Inspect work at key stages rather than waiting until completion. It is far cheaper to fix problems during the job than after the subcontractor has left site.

Paying subcontractors

Pay on time. Late payment is the fastest way to lose good subcontractors. They will work for someone who pays reliably, even at a slightly lower rate. Use InvoiceAdept to manage subcontractor invoices alongside your own client invoicing, keeping your cashflow clear.

FAQs

Do I need employer's liability insurance for subcontractors?

Not for genuine subcontractors, but you do need it for employees. If HMRC reclassifies a subcontractor as an employee, you would be in breach of insurance requirements. Some insurance policies cover labour-only subcontractors. Check with your insurer.

Can I deduct money for defective work?

Only if your subcontract agreement allows it. Without a written agreement, deducting from payments for defects often leads to disputes. A clear defect liability clause in your agreement gives you the legal basis to withhold payment until defects are rectified.

What if a subcontractor injures someone on my site?

If the subcontractor has their own public liability insurance, their insurer handles the claim. If they do not have insurance, you may be liable. This is why checking insurance before hiring is non-negotiable.