In business and construction, the terms contractor and subcontractor are often used interchangeably, which can be confusing. Understanding the difference between the two and how they work in business can help you establish expectations about roles and responsibilities.
What is a contractor?
A contractor (external link) is an independent business or individual hired by a client to complete specific work or projects.
In the UK, contractors typically operate as sole traders or limited companies, working under service contracts (external link) rather than employment contracts. They typically control how, when, and where they work, provided they deliver the agreed outcomes.
Contractors don’t receive company benefits and are responsible for their own taxes, National Insurance contributions, and expenses. They’re often specialists in certain areas that clients need for specific projects or periods.
For example, a retailer might hire an IT contractor to upgrade their sales systems across 50 shops. The retailer chooses a contractor because they need specialist knowledge of retail systems, and want this one-off project turned around swiftly.
If you’re considering becoming a contractor, you can read more in our guide.
What is a subcontractor?
A subcontractor (external link) is hired by the main contractor to perform parts of a larger project or contract. They’re typically one step removed from the client – working under the contractor rather than directly with the client. Subcontractors typically specialise in particular trades, skills, or services that the main contractor can’t offer in-house or chooses to outsource. This can allow contractors to take on larger or more complex projects by using external expertise.
Using the retail IT contract example, the contractor might hire an external subcontractor specialising in cable installation. While the main contractor might handle system setup and staff training, the subcontractor might handle the physical cabling, which can require expert skills, specialist tools, and potentially certifications that they don’t have internally.
Key differences between contractors and subcontractors
| Feature | Contractor | Subcontractor |
| Hired by | Client directly | Main contractor |
| Paid by | Client | Main contractor |
| Contract | With the client | With the main contractor only |
| Responsibility | Full responsibility for the project | Responsible to the main contractor |
| Client communication | Directly communicates with the client | Typically communicates through the main contractor |
| Liability | Directly liable to the client | Primarily liable to the main contractor |
| Scope | Can cover the entire project | Typically covers specific tasks |
Contractor and subcontractor relationships in practice
Let’s say that a commercial office is being refurbished, and the property owner hires a building contractor to manage the renovation. The main contractor then hires various subcontractors: an electrical specialist, a plumbing firm, and a flooring company.
The main contractor orchestrates all activities, managing timelines and handling client communications. Each subcontractor goes to work and reports their progress to the main contractor, who then communicates with the client.
If the electrical work is delayed, the property owner holds the main contractor accountable, not the electrical subcontractor directly.1 (external link)
Are contractors and subcontractors employees?
Under UK law, contractors and subcontractors are typically classed as self-employed (external link). They operate their own businesses, control how they work, and bear financial risk for that work. However, this can depend on the specific working arrangements and can be complicated.
If a contractor or subcontractor is hired under regular working patterns, high levels of control, or integration into business operations, professional legal advice might help to determine the correct status of employment.
Insurance and legal responsibilities
Contractors and subcontractors typically have various legal responsibilities, which are outlined in their service contracts. These can include:
- Quality and warranty obligations – Main contractors typically provide warranties to clients and may seek ‘back-to-back’ warranties from subcontractors.2 (external link)
- Health and safety compliance – Contractors and employers typically share responsibility for site safety, while subcontractors must meet safety requirements and report any hazards.3 (external link)
Many who are getting started as contractors or subcontractors choose insurance to help protect them from the risks associated with their responsibilities. Types of insurance for contractors can include:
- Professional indemnity insurance – can protect against claims arising from professional errors, omissions, or negligent advice.
- Public liability insurance – can help cover third-party injury or property damage claims, which can be useful if you work with or around members of the public.
- Employer’s liability insurance – typically legally required (external link) if you employ staff, even on a temporary basis, and can cover claims from employees who are injured or become ill due to their work.
Disclaimer:
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.
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