What is Subcontracting


This refers to entering of pledged contract with a third person or an outside company to complete a certain task. The third person or the outside company is called a subcontractor. These kind of contractors are hired by small company in getting there work done. For example to file tax returns of a company, maintenance of pay records of the company, to handle some extraordinary projects etc. This may also be called outsourcing in a smaller sense.

Employment of such kind of workers in advantageous in many ways. The company can focus on the growth of business leaving aside small activities to be taken care by these subcontractors. Employing subcontractor is less expensive than full time employees, since they need not pay compensation benefits, health insurance to subcontractors. But these kinds of employees also have some disadvantages related to quality of work and the time frame towards completion of work.  

Let’s discuss the process of subcontracting:

  • Analyze the essentials of business: it has to decide if an outsider is required or not. This also involves a business to choose what kind of association he or she wants to continue with them. The business should also decide in advance if the subcontractor is required in any strategic decision making.
  • Staff mix ratio: the next important step in the process is to decide what kind of subcontracting staff is required and in what proportion.  This is very imperative because the permanent employees of the organization should not feel insecure towards hiring of subcontractors. Hence the ratio of permanent staff and subcontractors should be planned before employing the latter.
  • Calling probable subcontractors: this is to collect the names of third party organizations or employees in finding out their interest. Some subcontractors may seek long term relationship, some may want a contractual period, and the other may be specialized for some projects. It is finally with the organization to check if they fit the job.
  • Discuss contract: when a subcontractor is selected the terms and conditions of the contract is discussed. Once it is finalized it will take the form of a document which includes performance of job, responsibilities defined, financial terms, restitution, cancellation or cessation.  
  • Interaction of subcontractor: the final process is to make the subcontractor to network with all the clients of the company. The company may also familiarize them to some crucial permanent employees of the organization with whom the subcontractor might interact. So that they maintain interpersonal relationship in the company.

The organization is advised to take intermittent feedback of subcontractors to have a check on them towards the progress of the work.

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