Deciding between hiring workers directly or hiring subcontractors in construction is never an easy decision, and often depends on a per project basis. Each method has its pros and cons, and many construction companies take advantage of both. The question that many businesses face however, is which method should be used in a specific scenario. Depending on the particulars of a project, timeline and location, hiring the right combination of workers to ensure profitability becomes a difficult task. This article discusses the specific differences of these methods and will provide benefits for both direct hire and subcontract workers.
Direct hiring can be described as employing the talent that is needed via a direct employment relationship. This means the worker is an employee of a specific company instead of a third party hiring agency. Therefore, the employee is a part of that company’s payroll and is taking advantage of any employee benefits that the business provides. Although in most industries, a salary-based job and the direct hire method is extremely common, the construction sector operates slightly differently.
A subcontractor can be employed in another capacity. One in which allows a company to solicit talent from third party agency. Therefore, this person is employed by another a separate business, and are hired on a contractual basis to provide work for another company. In many instances in construction, subcontracting is the typical mode of business. Rather than hiring a permanent worker, many construction companies rather hire employees on a specific time-bound contract or per project, which can help allocate money when needed.
Although it is easy to understand the difference between these two methods, selecting which one is the best for the business becomes a more challenging task. Often some businesses lie in the middle of the spectrum, and utilize both strategies. The rest of this article will discuss the benefits of each method, along with when it is appropriate to use either direct hiring or subcontracting.
Benefits of Direct Hiring
Direct Hiring is beneficial for fulfilling routine or simple construction jobs, and provides you with a great base of workers for your business. Your employees often develop into your most important asset and having a team that is reliable and productive is the first step to success. Although it may seem like a big investment, there are a number of reasons as to why directly hiring workers makes sense for some construction companies. Here are some of its benefits:
- Employees take pride in working for a company, and will go the extra mile to protect its reputation. Direct hire gives workers a greater sense of commitment from employers which can help them represent your brand and business in a more positive light.
- Workers are ensured job security, which translates into greater employee satisfaction. This may have a positive effect on job progress and productivity.
- Having a consistent team working on a specific project for a long time can help build teamwork and collaboration which will be carried over to future jobs.
- Employees who have been hired directly have a greater responsibility to your business and are sometimes more reliable than subcontracted workers.
- A permanent workforce allows for greater flexibility in scheduling between various jobs and addressing last minute changes, allowing your business to hit deadlines more accurately.
- All employees are trained properly and are familiar with your specific rules and regulations.
Benefits of Subcontracting
In many instances, subcontracting is the preferred mode of operation. Specifically, subcontracting is ideal for complex projects that require a number of specialty contractors for largescale buildings, industrial or residential developments. Subcontracting means more work in terms scheduling workers and resources but depending on the project, it may be a necessity. Here are some benefits of subcontracting:
- If the project is out of your scope of your business, hiring a subcontractor is ideal. Rather than taking on projects that are too big or complex can ultimately hurt your business and turning to an expert subcontractor may be the best way to deal with these projects.
- When compared to directly hiring staff, you find financial savings by bypassing paying for benefits, paid vacation and other costs associated with your employees. This also in-turn decreases the payroll taxes you must also pay.
- Subcontractors often utilize their own equipment and tools which prevents you from wearing out your own vehicles or equipment. This can help save on depreciation costs.
- Subcontracting lessens the load on construction business owners, allowing you to focus on other jobs and back office work. Hiring a good subcontractor frees time for owners to address other parts of their business, reducing the time spend on site.