Subcontractor Agreement

What is a subcontractor agreement?

A subcontractor agreement is a legally binding contract used when a business or contractor engages an independent party, such as a business or freelancer, to perform specific work or services in exchange for remuneration. This document does not aim to form employment relations, and its primary purpose is to engage additional staff or minds on a short-term basis. For example, in Australia, subcontractor agreement templates are widely used in the construction industry, research and development, trading, IT, etc.

A solid subcontractor agreement template outlines the scope of work or services to be provided, payment terms, rights and obligations of both parties, and other important provisions such as confidentiality, insurance, etc.

Having a properly drafted basic subcontractor agreement template ensures compliance with Australian laws, as well as reduces the risk of relations being characterised in the future as employment.

Who should use this subcontractor agreement?

This professionally drafted subcontractor agreement can be a helpful legal solution for:

• independent contractors searching for a solid subcontractor agreement template for daily use;
• freelance consultants looking for a good template to protect their rights while working with other contractors;
• professional consulting agencies searching to engage additional staff for their client’s projects and tasks;
• IT firms and developers needing a solid contract to engage individual IT developers on a regular basis;
• builders and construction companies searching for a compliant legal solution for engaging additional labour.

How to draft a basic subcontractor agreement template?

A solid subcontractor agreement example must include important elements below:

Scope of Work and Deliverables

The text of a subcontractor agreement must outline a detailed description of the services or work to be performed by the subcontractor. Since time is of the essence for this type of an agreement, parties should also agree on the major milestones or key dates the subcontractor should be able to fulfil.

Apart from that, parties shall also agree on who shall provide all necessary equipment, materials or both for the services and work. If such equipment or materials are provided by the subcontractor, the contract must mention if their prices are included in the subcontractor’s fees or not.

Payment Terms and Invoicing

Even a simple subcontractor agreement template shall define how much, when and how a subcontractor shall be paid. It is not necessary that payment terms under the subcontractor agreement shall reflect the provisions of the master agreement between the client and the contractor.

Parties can also include penalties in case a contractor fails to make a payment within the agreed timeline.

Independent Contractor Status

This clause is one of the most important clauses in any subcontractor agreement, as it defines that the relations between the contractor and the subcontractor are those of independent parties and shall not be considered employment, a joint venture, a partnership or the formation of any other entity under Australian laws.

Insurance Requirements

A standard sample subcontractor agreement shall include a subcontractor’s obligation to obtain all necessary insurance policies required for the provision of services or performance of the works, including worker’s compensation insurance if a subcontractor engages their workers or staff and standard Australian public liability insurance.

Confidentiality obligations

When a subcontractor has access to a client’s sensitive information, such as accounting, designs, plans, analytics, SEO information and others, further disclosure of such information can significantly damage a client’s business. Thus, protection of such information is essential.

Inclusion of a confidentiality clause is common for a subcontractor agreement in consultancy, finance or IT industries in Australia.

If parties want to add an extra layer of protection, they can enter a separate confidentiality agreement instead.

Key legal considerations for subcontractor agreements in Australia

Workplace Safety Obligations

All subcontractors, including their employees, staff and labour, are covered by a contractor’s workplace and safety policies in place while providing services or performing the work at the contractor’s site, premises or other place under the control and supervision of a contractor. It does not matter if work or services are provided at the construction site, at the office or at another location, as the subcontractor becomes automatically protected by the Workplace Safety and Health Act 2011.

All in all, it means that a subcontractor has the right to a safe environment, the right to be instructed and trained, the right to get protective equipment when working with hazardous or other dangerous materials and so on.

Risk of Sham Contracting

Engagement of subcontractors under a subcontractor agreement template Australia can sometimes pose a risk of characterising such relations as employment. This risk commonly arises where the agreement is used to effectively “relabel” what is, in substance, an employment relationship.

The indicators are usually the following:

• supplying subcontractors with all necessary equipment and materials;
• signing subcontractor agreements for an indefinite period of time;
• making subcontractors work according to a specific schedule;
• making subcontractors to work at specific locations only, etc.

While each of the characteristics separately cannot determine that the relationship is one of employment under the Fair Work Act 2009, the combination of all or a few of them may pose a risk. If the Australian Taxation Office finds out it’s an employment instead of a contractor relationship, a contractor may need to pay superannuation to all subcontractors on top of the agreed-upon fees.

Limitation on Engagement of Subcontractors

If your business plans to engage subcontractors for the performance of certain works or services under the master agreement, make sure the latter does not prohibit such an engagement. In some Australian industries, such as finance or IT, master service agreements may provide such a limitation.

Sometimes, the original contract for the provision of services or work may also require a client’s prior approval of the subcontractor’s identity. In such a case, a contractor must first obtain a prior approval to be able to sign subsequently the present sub subcontractor agreement.

Why should you use this subcontractor agreement template Australia?

Choosing a solid and professionally drafted basic subcontractor agreement template gives you a number of unique benefits:

• ensures clarity for your project from A to Z;
• shapes your relations with a subcontractor in a clear, professional way;
• helps you to comply with Australian laws, including the Fair Work Act 2009, Australian Consumer Laws, and the Independent Contractors Act 2006;
• allows you to use a template that is fully tailored to your specific needs;
• reduces potential disputes and controversies during the provision of services or performance of works;
• clarifies mutual rights and obligations for both parties.

The present document can only be used for the delegation of all or part of the work or services under the master contract to a subcontractor. If you are looking to enter a services or contractor agreement with a potential client, in that case a Service Agreement or Independent Contractor Agreement shall be used instead.

How to customise a subcontractor agreement template with FasterDraft?

To get a fully customisable document template, follow a few easy steps below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format – a subcontractor contract agreement in PDF or Word format.
4. Make a payment.

The document template is ready for instant download immediately after the purchase.