By Samkele Mchunu
A subcontract is commonly used in the manufacturing, construction, and information technology industries, among others. It is an excellent tool to reduce costs, improve quality, and optimize efficiency by hiring an expert to work with you on one or more short-term projects.
One of the earliest challenges encountered by a growing SME is to scale the business by keeping costs in control. This is when the power of subcontracting comes to the rescue.In this article, we’ll discuss all things subcontracting, the benefits of subcontracting, the different types, and the difference between outsourcing and subcontracting. Read on to understand more about it.What Is Subcontracting?Subcontracting is the practice of assigning part of the responsibilities or requirements of a contract to another party.
This can be done for a variety of reasons; to save time or money, or to access specialized skills, expertise, or equipment that is unavailable in-house. It may also be undertaken to improve the overall quality of the project.Sub-contract work is common in both small and large companies where complicated projects are the norm. There are many functions that small businesses may outsource to subcontractors, like parts of manufacturing processes, preparing payroll, or handling tax compliance.
Specifically in the manufacturing industry, for instance, when manufacturers require a single subpart of a product to be manufactured or need a minor task completed, they usually hire a contractor. This contractor then performs the task under a contract for a predetermined fee.For example, if a manufacturer produces pens, and does not have the required equipment for printing the pen labels, he may choose to outsource the service of printing to a contractor.
Subcontractors are also known as independent contractors, vendors, or freelance employees. Here it’s important to note that subcontractors are not full-time employees of the company.Therefore, you do not manage or oversee them, give them detailed instructions on how to do their tasks, or exercise line management authority over them.
