What is a Subcontractor Agreement?
A Subcontractor Agreement is a legal contract which allows you, as a contractor, to engage with a sub-contractor for the provision of services.
It outlines the details of the work or project to be performed and the terms of the agreement, including services, payment terms, confidentiality, termination and limitation of liability.
A Subcontractor Agreement can be used when you (as the head contractor) don’t have the human resources or skills to complete work that you have been contracted to perform.
A well written agreement will not only provide you with legal protection, it will also help manage your contractor’s expectations.
Who can use this template?
- A business (“head contractor”) engaging a subcontractor for specific services or a project
- Subcontractor
- Independent Contractor
Do I need a contract?
Yes, definitely! A contract protects both you and your subcontractors.
You should always have a contract signed before work starts.
Putting things in writing protects both parties and gives certainty.
Contracts are about more than wrapping your subcontractors up in red tape and telling them what they can’t do. Think of your contract as relationship insurance: it does all the hard, boring work of keeping the relationship on track, so you can focus on the fun part – the actual business.
Other names for a Subcontractor Agreement
- Independent Contractor Agreement
- Subcontractor Contract
- Services Agreement
What does this Subcontractor Agreement template include?
Our Subcontractor Agreement template covers everything you need in the contract:
- Schedule – key details of the services to be provided by the subcontractor (start date, scope of works , fees, deposit etc)
- Engagement, Contractual Relationship and Term – makes it clear that the subcontractor is not an employee, agent or partner, how long they will be engaged
- Standard of Services – requirement to complete the work to a certain standard
- Materials and Labour – subcontractors provide their own materials and labour to complete the contracted tasks
- Occupational Health & Safety – the subcontractor must comply with all relevant legislation and regulations
- Insurance – insurance required (e.g. public liability)
- Payment – very important – how you will be paid!
- Tax Obligations – requirement for ABN, tax invoices and GST (if applicable)
- Warranties and Indemnity – important legal clause
- Confidentiality – to keep confidential information private between the two parties
- Intellectual Property – who retains ownership of intellectual property created during the course of the work
- Limitation of Liability – important legal clause
- Non Disparagement– to protect your reputation
- Termination – how either party can terminate the contract
- Restraint – a restraint clause is included to protect the interests of the head contractor. In practice this can be difficult to enforce
- Dispute Resolution – the process to manage a dispute if a problem arises
- General – standard contract clauses such as Assignment, Severance, Entire Agreement, Waiver and Governing Law
Differences between an employee and a contractor
Whether you are an employee or a contractor depends on many different factors.
Contractors generally:
🔹 work for themselves and are their own boss
🔹 are free to accept or refuse work
🔹 control their own working times
🔹 provide their own tools and equipment
🔹 have no guarantee of future work
Employees generally:
🔸 work in someone else’s business
🔸 are subject to controls on how, where and when they do their work
🔸 are paid a wage
🔸 receive employee entitlements, such as sick and annual leave
🔸 have the expectation of ongoing work
Further Information
We recommend you visit the Fair Work Ombudsman website to read more. If you’re an employer, visit the ATO’s website to learn the tax and super obligations for both employees and contractors, and read more about the differences between them.
Do contractors need an ABN?
Yes, they do. Contractors are self-employed individuals or companies. To legally operate as a contractor in Australia you need to register for a Tax File Number (TFN), Australian Business Number (ABN) and in certain circumstances you need to register for Goods and Services Tax (GST).
What is sham contracting?
A sham contracting arrangement is when an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done to avoid paying employee entitlements. Even if you make an innocent mistake, you can still be fined!
If you’re convicted of sham contracting, you could be hit with a fine of up to $12,600 as well as back-payment of wages and entitlements.
Our Subcontractor Agreement template makes it crystal clear that you have a true contracting arrangement.
How do I include all of the details for the job in the contract?
We have included a Schedule in the contract where you can write down all of the specific details of the services or project. This includes things like scope of works, start date and fees.
Does the subcontractor get paid a fixed fee, or an hourly/daily rate?
It’s up to you to negotiate the fees and how much the subcontractor will be paid.
For a specific project, you might like to have the cost certainty of a fixed fee, but it’s very common for contractors to charge out at an hourly or daily rate.
How do I stop a subcontractor from taking my clients, or competing with my business?
We have included a restraint clause in our Subcontractor Agreement template to prevent the subcontractor from taking clients or employees away from your business, or competing directly with your business. This clause has been included in the contract to protect the interests of the head contractor.
Who is responsible for work performed?
You need to ensure that you have the right to subcontract the work before you get started. This should be clearly outlined under your existing contractor agreement with the client. If you are allowed to subcontract the job, you will generally be held responsible for any:
- defects in the subcontractors’ performance
- other violations of your contractor agreement.
You have engaged them to act on your behalf, so you will be held accountable for their actions.
However, you can negotiate with subcontractors to ensure that you are not held accountable for their work. You can achieve this by making the subcontractor responsible to the client for their own functions.
Can I terminate a Subcontractor Agreement for non performance?
Yes you can.
Our Subcontractor Agreement template includes a detailed termination clause which allows you to terminate for non performance or failing to meet key responsibilities listed in the agreement. In other words, if the subcontractor isn’t doing their job properly, they can be fired!
Is this Subcontractor Agreement template legally binding?
Absolutely!
All of our templates have been drafted by qualified Australian lawyers who hold an Australian legal practicing certificate.
We are affiliated with a commercial law firm based in Sydney.
