Do you sub out your work?
It is a very simple question but the most important. There is a definite market for subcontractors in the St. Louis area and people are building companies without employing one single person. What does this mean to homeowners?
Sales companies who sub out all of their work play by a different set of rules when it comes to liability and control of the job-site.
The IRS and the Missouri Department of Revenue have a very clear set of guidelines when it comes to the difference between a subcontractor and an employee.
By definition of Missouri and Federal law a subcontractor must adhere to the following guidelines:
- A sub supplies all of their own tools, equipment, and materials.
- A sub makes their own hours and makes their own decisions based on their existing workload.
- A sub works for many contractors and has a heavier workload than an employee. Often subs have many jobs at one time.
- A sub decides how much to charge instead of receiving a set amount of pay.
- A sub supplies their own insurance. This includes workers compensation and liability.
- A sub can easily slide people in and out of jobs without documentation and pay cash.
- A sub can place a lien on your property if the general contractor does not pay them for the job they did, even if you already paid the general contractor.
What exactly does this mean to a homeowner who hires a company to complete a project who uses subcontractors?
Will this affect the products and techniques pitched at me when I made my decision to hire a particular company?
The tools, equipment, materials, and techniques used, discussed in the sales pitch from the original company may change at any time. A subcontractor is an independent company with their own set of rules.
Scheduling concerns, job timelines, and lines of communication.
A general contractor schedules a sub around the subcontractors schedule, not yours. They often have heavy workloads and complete jobs for many contractors, meaning scheduling can easily become an issue and your job put on the back burner.
There are many cooks in the kitchen which can become a headache. You will not communicate directly with the subcontractor. You will talk to your salesman, he will talk to his office manager, who will then talk to the subcontractor. This is not only time-consuming but also opens up a whole new margin for error and confusion, which is common in these arrangements.
Your job can easily be pushed aside depending on the subcontractors work load. There is no one to fill in if something happens to that sub, another subcontractor is scheduled. It is not an easy switch due to signed contracts and approved bid amounts. If the sub quits mid job your salesman will negotiate a whole new deal and contract with a new sub company. There is a high turnover rate in the subcontractor world which means this is more likely than not to happen at any time.
Who is in charge here anyway?
Many times during a large remodeling job extra work is found. If this happens, the process starts over again. The sub calls your salesman’s office manager, they call the salesman, the salesman renegotiate’s pricing with you, the salesman then has to renegotiate pricing with the sub. All parties must sign new contracts. This is an added hassle, and more time added until completion. A sub can easily decide your job is more labor intensive than the salesman predicted and ask for money mid job. Even if you already have a contract with the salesman, your contract is renegotiated. A sub does not work day-to-day with the sales company and pricing is ever-changing so it is difficult to stay on the same page with all parties involved.
Subcontractors and Insurance Liabilities.
According to state law even though the sales company is selling you the job and showing you a certificate of insurance, that insurance does not cover the people at your job site. The subcontractor is responsible for supplying their own insurance. If the office staff does not check the status of the subs insurance regularly, it can lapse at any time. This means you are opening yourself up for a lawsuit. You may have uninsured workers in your home and be unaware. This puts your own homeowners insurance at risk long-term. This also means if a sub uses his uninsured cousin at your job because he’s shorthanded, you are an open target. Unless the sub uses employees which is highly unlikely, the people who work for them also must carry insurance on themselves. The result is your job-site filled with uninsured workers regardless of the insurance certificate the salesman provided.es company supplied you with a certificate of insurance. Unless you insist anyone entering your house has proof of insurance and then call to confirm you are left in the dark.
What about the Missouri Department of Labor Workers Compensation Benefits?
Subcontractors are 1099 workers. This means there is no employer contribution taxes paid to the state. 1099 workers are not entitled to workers compensation or unemployment benefits through the state. There are no taxes taken out of the money paid to them it is essentially a cash payment.
What do you mean there is a lien on my house!? I paid the bill!
If your sales company hires a sub to do a job you now open up the door to liens. Even if you pay the sales company, if they do not pay their sub, you may find yourself with a lien on your home. To make matters worse, if the sub being used is also using subs for your job and those secondary subs are not paid, it’s the same liability. Even if you have a receipt showing you paid your original salesperson, you are still at risk. Any subcontractor working on your home can file a lien if they are not paid or even if they feel they were not paid enough. If the sales company does not pay the supply house for your materials you may find a lien placed on your home. Many times these types of sales company’s are in and out of business within years. This is not an ideal situation for any homeowner and can also affect your credit.
Pricing and warranties, the hard truth.Many times people build sales companies and use high pressure sales techniques and shocking sticker prices. The old saying you get what you pay for is true, except in this situation. In a situation such as this there are many people with their hands in the cookie jar. This means to pay everyone a fair cut you will be sacrificing product, quality, and workmanship. Also, warranties from fly-by-night companies such as these, usually cannot be honored over the years. A warranty is great, but not if you can’t redeem it. The chances they still work with the same subs, are still in business, or have the same contact information are slim.
How does hiring employees instead of subcontractors benefit me?
- Modern Solutions has complete control over everyone at every job site. Employees work directly for Modern Solutions. Modern Solutions directly manages all our employees. They work forty hours a week and receive an hourly rate and a paycheck. There are no contracts or changing amounts paid at each job. They make the same amount no matter what. They don’t work for other companies. They won’t need to rush to get to another job. Your job will receive the undivided attention it deserves.
- They use all the products, materials, and tools as supplied by Modern Solutions. This means what you discuss with the salesman is what you will get.
- Modern Solutions employs an office manager and project managers who all work as a team towards a common goal. If something changes, extra work added, it is a simple fix. The only discussion about money is between you and Modern Solutions. There are no more contracts to negotiate outside of the company. It’s as simple as a change order being submitted. Your project can continue with little or no down time. Also our team works together in the same office which helps to keep everyone on the same page.
- Our insurance policy covers everyone who works for Modern Solutions. There are no insurance issues to worry about at all.
- Modern Solutions withholds taxes from our employees paychecks. We pay employer contribution tax to the federal, state, and local government. This means our employees can receive benefits such as state workers comp benefits and unemployment benefits if needed.
- When your job is complete and paid for the only lien waiver you need is from Modern Solutions. Nobody has the power to place a lien on your home except us.
- The pricing you agree upon with Modern Solutions is not the cheapest in the industry however, you get what you pay for.It is easy to say you are a remodeling company. To actually be a legitimate remodeling company who follows the law and employee guidelines is much more difficult.
- We protect our customers from the issues that arise from hiring subcontractors such as insurance risks, liens, and poor workmanship. This protection means we pay more out in taxes to the government and it benefits our employees. It is a small price to pay to offer our customers peace of mind.
Don’t allow a good sales pitch to destroy your goals and investment
You should not have to risk your home and stability to increase the value of your home.
There are many subcontractor companies making big promises.
At the end of the day, the decision you make is extremely important to your future.
Ask the hard questions and insist on documented proof .
At Modern Solutions you will receive quality services, by licensed professionals, who carry appropriate insurance.
Our insurance protects your home and future. Your warranties will remain valid for years to come.The workmanship and finished product will withstand the test of time, and the peace of mind this brings is priceless.