Working as a subcontractor can provide you with more freedom than working as an employee and it could potentially help you earn more money. Subcontractors can be paid in several ways, depending on the relationship with their employer. When you work as a subcontractor, you are not technically an employee even though you may be doing many of the same things that employees do.
What Is a Subcontractor?
Although many companies have subcontractors, some of them are actually employees who are mistakenly called subcontractors. A subcontractor is an individual who is not specifically controlled by his employer. If an individual is controlled by an employer as far as taking directions and detailed instructions on how to do work, he is an employee. Subcontractors agree to get a job done and agreed to do it for a certain amount of money. The employer does not care how they do the job or when they do it as long as it gets done.
Some subcontractors are paid with a lump sum of money by their employers. For example, a technical writer contracts with a company to write a manual. The company agrees to pay that writer a certain amount of money to write the manual. The writer then writes the manual for the company and submits it. At that point, the company then pays the writer a specific amount of money. It does not matter how many hours the writer spent on the job, she gets the same amount of money.
Other Payment Methods
Subcontractors can also be paid with other arrangements. For example, some subcontractors simply keep track of how many hours they work and are then paid weekly or biweekly. They may also be paid in installments. For example, if a contractor is working on a large job, the customer or employer may pay in four equal installments over the course of the job. Subcontractors can be paid in many different agreements, depending on the terms that they negotiate with their employers.
When subcontractors are paid, they are given all of the money that they earned without any withholding. By comparison, employees have money taken out of their paychecks for state taxes, federal taxes, Medicare, Social Security, retirement accounts and medical insurance. The contractor will be responsible for keeping track of his own pay and setting back the appropriate amount of money to pay taxes. Contractors usually have to pay quarterly estimated tax payments to the Internal Revenue Service as a result.