In recent times small business owners have been inundated with online hype about the role of independent contractors, the growth of the gig economy and digital engagement tools. With such an onslaught of often conflicting information, the basics of what role subbies perform in small business can become lost.

Why hire subcontractors?

Subcontracting is an essential tool for small businesses across Australia to connect and engage with other small businesses. It allows for two businesses to combine forces to deliver the best possible outcome and meet timeframe requirements.

Small businesses by their very nature don’t have the resources to have professional experts across every field employed within their business, it just simply isn’t possible. Without subcontracting, small businesses would loose out on the ability to bring in specific professionals to complete a job.

The result of subcontracting is a continual intermingling of small businesses across Australia who use each other’s services and skills when and where they need them. This helps not only the businesses, but the communities they work in and creates a diverse range of jobs.

In a broader context these relationships are key drivers in producing a productive workforce. The incentive of being paid to achieve a result rather than being paid by the hour creates a driver that can create substantial productivity boosts to businesses, the community, and the economy.

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A simple example

A simple example is your everyday builder, who generally operates more as a project manager than an on the tools carpenter. The builder wins the contract to build a specific building and then assembles a team of the best suppliers they can to complete the job. In the process, the builder will typically subcontract out the individual aspects that go into the building e.g. electrical, plumbing, framing, gyprocking and the list goes on. These other businesses have a niche set of skills and are great at what they do. Together, they get the job done in a way that any single small business would struggle to do on their own.

It’s a commercial contract

A subcontracting relationship is made possible by creating a commercial relationship (the contract), where each of the businesses agrees to perform a job for an agreed compensation. The key here is that it’s a commercial contract and is governed by the laws of contract which gives subcontracting the flexibility it needs to adapt to the specifics of the two businesses joining forces.

Australia is built on the back of small businesses, we know this and we hear the rhetoric regularly in the media. Contracting forms the glue that allows these small businesses to thrive and grow with each other.

The end game

The role of subcontracting is the mechanism for small business to share skills, experience and expertise in a business environment that demands increasing change, specialisation and flexibility.

For subcontracting to thrive in the business community it is essential that all participants follow the laws that apply to subcontracting in their entirety. The laws are diverse and range from the common law to state, federal and local legislation. Having access to professional support for small businesses to understand and manage their compliance responsibilities will be a key factor in ensuring the highest standards are maintained.

The benefits of a well-functioning community of inter-connected small businesses flows down to almost all aspects of Australian life and should be supported and nurtured.