When a company hires workers for a new project, the employer wants the job to be undertaken by the most skilled individuals. Although there are advantages to hiring a regular employee, hiring a general contractor who further hires subcontractor(s) to complete the work also has benefits. Therefore, it’s best to be aware of the differences between the two before making an informed decision.
Generally, an employee takes on a variety of projects and performs an array of jobs for an employer and is hired for permanent, long-term work. But there is another option for the employer. A subcontractor performs all or part of the obligations of the main contractor, hired by the employer. Hiring subcontractors can reduce costs or mitigate project risks for the general contractor. There are further distinctions between employing an employee or a subcontractor.
An employer provides as employee with the tools, equipment, and materials required to carry out the work, which can be expensive. A subcontractor often owns and provides their own tools, equipment, and vehicle for the job.
An employee recieves benefits, statutory holiday pay, and often works set hours of work every week, all paid for by the employer. Subcontractors are responsible for their own benefits, government tax remittances, insurance, and so on.
A business can discipline, suspend, or fire an employee; they cannot discipline a subcontractor, but may end a contract with them if the work is unsatisfactory.
Under the Employment Standards Act, an employee has the right to minimum wage, and pay for overtime, holidays, and even vacation pay. A subcontractor does not.
Subcontractors operate as his or her own business; thus, he or she can work for multiple employers. Subcontractors can also operate as sole proprietors or have an incorporated business.
An employee can be tasked with taking on many different job duties. Subcontractors are often specialists in their field, thereby bringing superior expertise to a project. Furthermore, the employer isn’t responsible for training the subcontractor as they would for an employee.
Subcontractors are engaged for a specific time frame or scope of work, which should be outlined with the general contractor. Traditional employees take on a variety of tasks and duties over a set work week.
Subcontractors determine their own hours and how to fit in multiple clients. Employees come in regular hours as scheduled by the employer.
Invoices are submitted by the subcontractors according to their billing schedule for work completed. Employees are paid an hourly wage or salary.
Employers withhold employment related taxes from the employee. Subcontractors are responsible for invoicing the employer and remitting their own self-employment taxes to the government.
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