The first time you put a subbie on, you stop being just a tradie and become a head contractor — with a safety duty you cannot delegate, payment obligations down the chain, and a sham-contracting risk that is now yours. Here is what your subbie agreement must cover, and the traps that catch first-timers.
What your subbie agreement must cover
Treat it as a mini head-contract:
- Scope and deliverables — inclusions/exclusions, drawings/specs, milestones, who supplies materials and plant, and what "completion" means.
- Price and payment (SOP-aligned) — lump sum / schedule of rates / cost-plus plus GST; written progress claims; and crucially, you must issue a payment schedule within your state's SOP timeframe if you dispute anything, or the claimed amount can become payable. Keep the payment term within the SOP maximums (~20–25 business days down the chain). Use the Subcontractor Agreement template.
- Variations — a written direction before the work; verbal is not payable unless confirmed in writing.
- Defects and back-charges — a defects liability period (e.g. 12 months); the subbie fixes their own defects within notice at their cost; and a back-charge clause if they do not attend.
- Retention — typically 5–10% per payment, half at practical completion and half at the end of the defects period; it is earned money held as security, not a discount.
- Indemnity and warranties — the subbie indemnifies you for their negligent work, WHS breaches and damage, and warrants fitness for purpose, due care, and code compliance.
- Insurance and licence — public liability (typically a minimum of $10M) plus workers' comp if they employ; certificates of currency before they start and on renewal, with a right to suspend if cover lapses; and the correct state trade licence. The subbie is a separate business — your policy does not auto-cover them.
- WHS and site rules — White Cards for all workers, a SWMS for high-risk work before it starts, your site induction, and a right to suspend if safety is not met.
- Term, termination and dispute resolution.
The sham-contracting risk is now yours
Call someone a "subbie on an ABN" when, on the contract and the facts, they are really an employee, and you are up for back-paid super, leave, PAYG, workers'-comp premiums and Fair Work penalties. The written contract is the starting point now (recent High Court and ATO guidance): it must genuinely reflect an independent-contractor relationship, and the reality has to match it. Engineer these factors:
- Control: you specify the outcome and standard; they control the method and sequence.
- Substitution: a genuine subbie can send another qualified worker; "must do it personally" leans employee.
- Result vs time: pay for a delivered result, not exclusive on-call hours.
- Tools and risk: they supply the major tools and vehicles and wear the rectification cost.
- Business indicators: they invoice you, charge GST, advertise, and work for other builders.
The danger zone is a long-term, exclusive, hourly "one job after another" subbie — periodically ask "is this now an employee?" See Employee vs Contractor & Sham Contracting.
Your safety duty flips — verify before they are on site
As the PCBU you owe a primary, non-delegable duty to everyone on your site — even independent subbies. Before a subbie sets foot on site, verify:
- Licences and quals — the correct state class, White Cards, and any special tickets (heights, EWP, rigging).
- Insurance — current PL (often $10M+) plus workers' comp; and check how your own PL treats bona-fide subbies.
- WHS and SWMS — a trade-specific SWMS for high-risk work, reviewed and implemented (not just filed), with sign-on sheets.
- Induction — site-specific hazards, emergency, amenities, PPE and exclusion zones.
You can stop unsafe work — and you should document it. This duty does not go away because they are a separate business.
The cash-flow trap that sinks first-timers
You now sit in the middle of the payment chain — claiming up and paying down. Subbies have a statutory SOP right to progress payments regardless of what your head contract says, and if you do not pay (or schedule) on time they can suspend work or adjudicate — shutting your site and jeopardising your own head contract. But SOP can require you to pay subbies within ~20–25 business days even if you have not been paid upstream — a timing gap that funds the project out of your own pocket. Controls:
- Align subbie payment milestones with your head-contract claims as far as possible.
- Avoid "pay when paid" clauses — they may be unenforceable under SOP and still leave you exposed.
- Keep a buffer of at least a month of subbie costs plus retention exposure as non-negotiable working capital.
First-timer mistakes
Handshake deals (scope and payment disputes, a weak SOP position); no insurance check (uncovered claims, personal liability); vague defect/back-charge terms (you pay to fix their work from your margin); paying subbies faster than you are paid (the crunch); treating subbies like employees (reclassification); no SOP process; poor WHS control; and using the subbie's quote verbatim as the contract (it conflicts with your head contract). A standard subbie agreement plus a pre-start licence/insurance/WHS checklist kills most of this.
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