Recently I’ve had a number of discussions with company owners about how to get their jobs built. It all comes down to using subs or employees, or as some like to say, “Should I be a paper contractor or a real contractor?” I don’t agree that you need to strap on a tool belt to be a real contractor, but you get the idea.
Let me list some arguments for each side:
Reasons to use employees and not subs
- You’ll have more control over all parts of the job, giving you a better result.
- You’ll have control of the schedule, giving you the ability to change on a dime if need be. That allows you to move people where they’re most needed, making it easier to get jobs done on time.
- Some believe that employees are less expensive than subs. That would reduce the cost of the job and increase the bottom line.
- Employees show up every day so you’ll be able to keep to schedule. With employees, you won’t have to listen to the excuses about why they can’t get to your job until next week.
- Employees can be trained on exactly how you want them to treat clients and what you want them to wear. You can also enforce your standards on grooming habits and other issues, such as the use of tobacco, alcohol and drugs, etc.
- You don’t have to worry about the IRS rules on subs versus employees.
Reasons to not use employees and hire subs instead
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- Employees aren’t able to get specialty work done nearly as quickly, accurately or effectively as a subcontractor who specializes in that particular phase of the job.
- Employees might not have all the tools they need to get a job done, especially if it’s specialty work.
- Employees cost money to move around. You’ll either need to invest in additional vehicles and possibly trailers to get them and your equipment to the job sites, or you’ll need to pay mileage and/or rental fees.
- Some believe it’s too darned hard to find good employees. It’s easier to hire subs, even if you have to wait for them to get around to doing your jobs.
- Using employees increases overhead, so some believe it’s less expensive to use subs.
In my opinion, the best route is determined by your personality and your ability to communicate.
If you have written employee policies, can communicate well with others, know when to hire and fire and are willing to do either one as needed, employees might be the best way for you to go. To be frank, that’s rare. Most contractors don’t even have the written employee policies that are needed to protect themselves and their employees, let alone the other skills that are important when dealing with employees. If that’s where you are, you’re probably better off hiring subs.
If your subs or employees aren’t getting the job done, look in the mirror to make sure you aren’t the problem. You’re in charge, and just as President Truman said, “The Buck Stops Here”. You’re the company owner and it’s up to you to make things happen. How well are you communicating what needs to happen?
This isn’t easy. Sometimes it feels like you need the patience of Job and the wisdom of Solomon to run a construction-related business. That’s why you deserve to be paid for what you do, because it sure would be easier to be working for someone else.
We’re going to cover this topic again next week with a guest writer who looks at this from a completely different viewpoint, namely, your insurance rate.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.