business people hands in circle with puzzle pieces

Working with Subcontractors – Everything Entrepreneurs Need to Know

business people hands in circle with puzzle piecesWhen a new business owner first begins to experience a snowball of success, it’s exciting – until the realization sets in that you have more work to do than you can handle by yourself! Before you rush to hire an employee, first consider the interim step most solo PR pros choose (and often never move beyond): building a support team of subcontractors.

For solo professionals who want to extend their capabilities while remaining a solo firm, or for those who need extra help on their way to becoming a larger agency, working with subcontractors can be a smart strategic move.

Subcontractors allow you to live out the maxim “do what you do best and outsource the rest.” But what do you need to know before you begin? Here, we answer some of the frequently asked questions from our community on subcontractors:

Why should I consider working with subcontractors?

Collaborating with other professionals is typically the key to growing a successful long-term Solo PR Pro business. While there are some instances where working alongside other vendors – each with a separate contract with the client – makes the most sense, many times this becomes too cumbersome for the client and inefficient for everyone.

subcontractor business people circling womanMoving beyond a business of one is the only way to compete for bigger opportunities and bigger revenue. Subcontractors can be used to:

  • Extend your service offerings by hiring a sub with specialized expertise, such as writing, social media, media relations, or design
  • Grow your company without adding permanent infrastructure
  • Navigate the peaks and valleys of seasonal or temporary demand, such as a big client event or campaign
  • Perform lower value work so you can focus your billable hours on higher value tasks, such as strategic oversight and creative direction
  • Test a new market or launch a new service
  • Cut back your hours. Trying to do it all can be a one-way ticket to burnoutville. Family emergencies, a vacation, or a desire to work less are good reasons to use subcontractors to keep the business moving forward – with less of you

A valuable resource that allows you to expand your capacity and capabilities and compete for new levels of clients, using subcontractors also allows you to hire what you need for specific contracts, effectively allowing you to create a custom team for every client/engagement, if you choose.

What are the legal considerations of working with a subcontractor?

We aren’t lawyers, and you shouldn’t to get too bogged down in legal technicalities (leave that to the attorneys!), but it can be helpful to understand how the law looks at subcontracting when you’re making decisions about how and when to expand your team.

Uncle SamJust as there are laws that govern traditional employment, there are laws and regulations that govern independent work and subcontracting. In the U.S., the federal government, the IRS, and some individual states all have rules that govern the use of subcontractors. Sometimes it feels like the rules are there to make our lives more difficult!

But in reality, the purpose of the regulations is to prevent employers from abusing people who are actually their employees, hiring them on contract to avoid having to pay payroll taxes and/or employee benefits.

You need to treat the subcontractor relationship as a business-to-business relationship, not as an employer-employee. Below are a few quick tips to keep you on the right side of the law:

  • Have a signed subcontractor agreement in place that defines the working relationship, as well as the terms of work – make sure they know they’ll be responsible for their own self-employment tax
  • Get a signed W-9 from your subcontractors and provide them with a 1099 form when required
  • Do not offer benefits
  • Hire subcontractors that have other clients, and are not solely dependent on you for their income
  • Make sure subcontractors provide their own equipment, training and materials to do the work. You can certainly share your online applications with them, such as MailChimp, bookkeeping software, WordPress, or a CRM, but don’t buy them a new laptop, for example.
  • Minimize the amount of time they spend at your place of work.

businessmen shaking handsNote that failure to comply could put you and your client at risk of employee misclassification, which can be very costly, so don’t try to push the boundaries. If you pay someone to do work on your behalf (even if it’s just your neighbor’s kid home from college), you have a relationship – it’s up to you to define what that relationship is.

Should I tell my clients about my subcontractors?

It’s very important to check your client contracts to make sure they don’t preclude you from having subcontractors work on their projects. Some contracts will prohibit anyone but you from working on the account (for traditional public relations, this is rare), while others will ask to be notified in writing, and some contracts are silent on the issue.

baseball benchIn the case of the latter, it’s typically a good idea to verbally mention you have a team of pros working with you – often, it actually makes a client feel better to know there’s a deep “bench” of professionals that can provide backup if the need arises.

Much depends on the client and the situation, but you can also get specific (e.g., “I’ve added an excellent writer on my team now) and if the subcontractor has an impressive online footprint, perhaps even mention their name. Telling the client and talking up your sub keeps it transparent, while making it clear you’re still the point person.

As you continue to grow and go after larger clients, you’ll find many instances where including your subcontractor(s) in the initial proposal is not only good for transparency, but also for winning the business. Groups of Solo PR Pros regularly band together to compete with large agencies for new business – and win!

Some subcontractors may never touch your client work, for example, a virtual assistant that helps you manage your email or a bookkeeper that assists you with invoicing. Most clients assume you have a support team of this sort, and if they don’t do any client work there’s no need to mention it.

What do I need to know before working with subcontractors?

Chances are, working as a solo PR pro you’ve become accustomed to doing things in your own way.

When you bring in a subcontractor, you may have to relearn how to clearly articulate your needs and define your expectations. This may mean thinking of your work in a different way so that you can clearly assign a work deliverable or creating systems that allow you to efficiently share work with a subcontractor.

The biggest lesson I’ve learned over the years is: go slowly at first, and do a test project or two with your subcontractor before cementing a broader or longer-term arrangement. In the excitement of finding a new team member, resist the temptation to start piling work on them from the get-go (even if they say they’re ready).

Contrary to popular belief, conversations and meetings only reveal whether you’re kindred spirits in personality – working together will help you assess each other’s professionalism and if your work styles mesh.

hierarcy pyramid drawing subcontractorsKeep in mind: you are ultimately responsible and liable for the work of your subcontractor – make sure you assign them a deadline a few days before you’re due to deliver their work to your client. If they do shoddy work or cause a delay, the client (rightfully) won’t be mad at anyone but you.

Where can I find a subcontractor?

The most common way of finding subcontractors is via referral – ask your trusted network (while keeping in mind that everyone’s work preferences are different). LinkedIn, Twitter, and good ol’ email can be useful ways to get the word out you’re looking for support, or look for specialized communities – members of Solo PR PRO Premium often share these kinds of opportunities in our private Facebook community.

If your network doesn’t yield the referrals you’re looking for, you can try some of the online tools available. If you’re mainly seeking admin assistance, you can investigate options such as Elance or vendors like Fancy Hands.

For skilled public relations subcontractors, you may be able to find one that fits your needs by searching on LinkedIn, or you can use Solo PR Pro’s Submit a Project feature, which allows you to share your requirements privately with the subscribing members of Solo PR PRO Premium. You don’t have to be a member to post a project, and because of the exclusivity of this tool (only indie PR consultants who take their business seriously enough to invest in premium membership will see it) you’ll be protected from the crazies that can pop up on the Internet!

No matter how you find your potential subcontractors, do your due diligence by checking their business, track record and ability to be classified as self-employed. Even if a subcontractor will have no direct contact with your client, they are a reflection of your business – and we want subcontractors who make our lives easier, not more difficult, right?

How do I pay subcontractors? Is there a standard markup?

Rates and methods of paying subcontractors depend on a number of factors, including the market, industry or specialty, and your agreement with the client.

Payment dayFor example, you can present a project-based unified bill and rate to your client that incorporates the subcontractor into the overall line item, or you may opt to break down the bill to show the subcontractor fees. You can pass the fees through without a markup, or add a fee on top of the subcontractor’s rates.

In my own business, I use the same standard for my subcontractors that I use for myself: I charge what the market will bear, and I don’t use a standard markup per se. Sometimes the markup could be 50% (e.g., a subcontractor doing account coordinator-level tasks bills me at $50 per hour, and I bill the client $75 per hour), but there are some occasions when I don’t markup at all.  For example, if a very high-level communicator has skills needed on the account that I lack, then I may simply bill the client their rate.

It’s also important to be honest and fair to your subcontractors, and treat them as the assets they are. Many large traditional PR agencies markup their subcontractors’ fees as much as 200% or more – and it often feels like exploitation to those working in that environment. At the same time, you incur expenses your subcontractor will not, including:

  • The time and costs associated with winning the business
  • Invoicing, bookkeeping and accounting
  • Meeting client insurance requirements
  • Annual contract negotiations
  • Meals, holiday gifts and other niceties that help keep the client relationship strong

Most subcontractors (and all of the good ones!) recognize that there are benefits to not being in the driver’s seat. As you consider payment:

  • Check your client contract (again). Are there specifics that dictate how you should bill for subcontractors?
  • Is the subcontractor delivering a work product that will not require any input from you? For example, if you are subcontracting a writer to write case studies, you may allow time for editing and/or adding client branding touches. However if you are hiring a developer to build an app, you might opt to simply pass through the rate.
  • Is the work directly related to a client? You may hire a subcontractor to help with administrative tasks that is not related to one specific client. You can treat the cost as an expense of doing business rather than a charge against a specific client.

circle of hands doing a fist bumpWorking as a solo professional requires you to think strategically about how you use your time – find a balance that allows you to get the highest ROI on your time and meet your earnings goals. With a finite amount of hours in the day, it is not always possible to work more to earn more. Subcontractors can help you take your business to the next level – and often have more fun doing it!

How about you, do you use subcontractors in your indie business? Do you have any questions we failed to address? Share your tips and follow-up questions in the comments below!

  • gerij9

    Excellent, excellent article. Be careful though. The legal aspects cannot be ignored because it can come and bite you in the pocketbook BIG time. I do marketing communications for plaintiff attorneys, including employment lawyers. A subcontractor is considered an independent contractor. The employment laws say, among other things, most of which you addressed, that to prove an independent contractor is not an employee, the project s/he does must be specific and have a beginning, middle, and end. In other words, I’d be very careful about a general role such as account mnmgt., but it would work if the person did a brochure for you or wrote blog posts for a specific blog. I strongly urge you as the employer to talk to an employment lawyer to check this out. You really don’t want to get on the wrong side of this as you could end up paying back benefits, pay, overtime, AND penalties.

  • Good insights. I’m sure you’ve seen a lot of unfortunate examples – thanks for adding your additional perspectives!

  • Michelle Francis

    Great article! I’ve been very successfully subcontracting many of my tasks to an amazing junior-level PR pro for the last few years in order to improve my work-life balance. I present her a “team member” to clients. One question I have is how should I account for this from a business planning/expense perspective? Should I add it as a line item to my annual expense calculation? The challenge there is it varies each month. Perhaps I estimate a percent of what I bill goes to outsourcing? I’ve posted this as a topic on our Facebook page, so will be curious to see what others thing!

  • amine koko

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