Working With Subcontractors: Agreements Insurance Certs and Payment Terms

Subcontractor relationships carry classification, liability, and tax risk that varies by state — this is general information, not legal advice. Have an attorney draft/review your agreement.

First, make sure they’re really subs

Before anything else: a “subcontractor” who works only for you, on your schedule, with your tools, is probably a misclassified employee — and that mistake can cost six figures in back taxes and penalties (1099 vs W-2). True subs run their own business, have their own insurance and license, and work for multiple clients. Confirm that first; the agreement below is for genuine independent subs.

What a subcontractor agreement should cover

1. Scope of work — exactly what they’ll do, deliverables, and standards.
2. Independent-contractor status — clearly stated, reflecting a real independent relationship.
3. Payment terms — rate, invoicing, when and how they’re paid, retainage if any.
4. Insurance requirements — they carry their own general liability and workers’ comp (see certs below).
5. Licensing — they hold the required trade license (licensing).
6. Indemnification & liability — who’s responsible if something goes wrong.
7. Warranty/quality — standards for their work and how defects are handled (warranty policy).
8. Timeline & termination — schedule and how either side can end the arrangement.
9. Confidentiality / non-solicit as appropriate.

Insurance certificates (don’t skip this)

Always collect a Certificate of Insurance (COI) before a sub starts:

• Proof of their general liability (GL) and workers’ comp (workers’ comp).
• Ideally naming you as additional insured.
• Verify it’s current — an expired COI leaves you exposed for their work and injuries.

Uninsured subs can become your liability, and you may even owe workers’-comp coverage for them — so this step protects real money.

Payment terms that keep it clean

• Clear rates and a defined payment schedule (tie to milestones on bigger work).
• Require invoices — reinforces their independent-business status.
• Pay reliably; good subs work for people who pay on time.

Your subs’ work becomes your reputation

To the customer, a sub is your company — their workmanship and manner land on your reviews. So hold subs to your standards and quality expectations in writing. Tailwind captures the customer’s verdict after every job, so you quickly see whether a sub is protecting or hurting your reputation — see how it works.

Scale with subs, without the liability. See how Tailwind works.