There’s a point in most freelance careers where the work outgrows the person doing it. You’re turning down projects you’d love, or saying yes and working weekends to deliver them, or spending hours on tasks someone else could do faster and better. Bringing in a subcontractor is the obvious answer, and it’s also the first time your business has to manage someone else’s work and someone else’s money.
Done well, it lets you take on more, earn more per hour and deliver better work. Done badly, it costs you margin, sleep and occasionally a client. The difference is mostly decided before the subcontractor starts.
This is general guidance, not legal or tax advice. Rules on contractor status, contracts and tax withholding vary by country. Check the specifics with a local accountant or lawyer.
Hire your first subcontractor when you’re consistently turning down or overrunning work, or when a skill outside your own is holding projects back. Mark up their cost to cover your management time, risk and admin, typically enough that you keep a meaningful share of what the client pays. Tell the client you’re bringing in help, check your contract allows it, and stay accountable for the result.
What a subcontractor is, and isn’t
A subcontractor is an independent business you pay to deliver part of the work you’ve agreed to deliver for your client. The client’s contract is with you. The subcontractor’s contract is with you. You sit in the middle, responsible for the result on one side and for paying on the other.
That’s different from a referral, where you pass the whole job to someone else and step away, and from an employee, who works under your direction on your schedule. The distinction with employment matters legally. If someone works only for you, on your hours, with your equipment and under close supervision, some tax authorities will treat them as an employee regardless of what your agreement calls them. The guide to managing contractors covers how to keep the arrangement clearly on the contractor side.
When to bring in your first subcontractor
There’s no revenue threshold that makes it the right time. These signals are more reliable:
- You’re regularly turning down work you’d want. Not once, but month after month. That’s demand your business can’t currently serve.
- Your tracked hours keep exceeding your estimates. If your time tracking shows you consistently over capacity, the problem is volume, not efficiency.
- A skill gap is shaping which projects you accept. A developer who needs a designer, or a writer who needs an editor, can win bigger projects by bringing that skill in.
- Low-value tasks are eating high-value hours. If you bill $120 an hour and spend ten hours a week on work someone would happily do for $40, you’re paying for that work at your own rate.
Equally, there are bad reasons. Don’t subcontract to rescue a project you underpriced, because you’ll now be losing money on two people’s time instead of one. And don’t hire for a single busy month if your pipeline beyond it is empty. Look at the next quarter, not the next fortnight.
How much to mark up a subcontractor
A subcontractor markup is the amount you add to what you pay a subcontractor before billing the client for their work. It isn’t greed. It pays for real things:
- Your management time. Briefing, answering questions, reviewing and fixing work. This is rarely less than you expect.
- Your risk. If the work is late or wrong, you absorb the cost of putting it right, not the client.
- Your cash flow. You’ll often pay the subcontractor before the client pays you.
- Your sales and the relationship. You found the client, scoped the job and carry the relationship. That has value.
A useful way to set the number is to price those costs directly rather than picking a percentage out of the air. A worked example:
| Amount | |
|---|---|
| Subcontractor: 20 hours at $60 | $1,200 |
| Your management and review: 3 hours at your $100 rate | $300 |
| Risk and admin allowance (10% of their cost) | $120 |
| Billed to the client | $1,620 |
| Effective markup on their cost | 35% |
If that billed figure is more than the client would pay for the work, the subcontract doesn’t make sense at those rates, and it’s better to find out on paper than halfway through the project. The freelance rate calculator is a quick way to sanity-check your own hourly figure before you use it in the sum.
There are three common ways to present this to the client:
- Fixed price for the deliverable. The client sees one number for the outcome. Your markup is built in and never discussed. This is usually the simplest and suits most freelancers.
- Your rate for all hours. You bill the subcontractor’s hours at your own rate or a team rate. Works when their skill level is close to yours.
- Pass-through plus a management fee. You show their cost and add a visible fee. Transparent, but it invites the client to question the fee and occasionally to hire the subcontractor directly.
What to tell the client
Tell them. Clients may not mind that you work with others, but they do mind finding out by accident, and some contracts don’t allow it without consent.
Check your contract first. Many client agreements include a clause on subcontracting, confidentiality or who may access their systems and data. If yours requires consent, get it in writing before anyone starts. If your contract is silent, telling the client is still the professional choice. The guide on contracts for clients you never meet covers the clauses worth having for next time.
Frame it around the outcome. “I’m bringing in a specialist designer I trust for the illustrations, so you get a better result on the same timeline” is reassuring. Silence followed by work in a different style is not.
Be clear that you remain responsible. The client should know they still deal with you, that you review everything before it reaches them, and that quality and deadlines are still your promise.
Pass on the confidentiality obligations. Whatever you promised the client about their data, intellectual property or non-disclosure, your subcontractor needs to promise you in writing.
Set the subcontractor up properly
A short written agreement prevents most problems. It should cover:
- Scope and deliverables, in as much detail as your client agreement has.
- Rate, pay type and when you’ll pay. Hourly, fixed or monthly, and on what terms.
- Deadlines that leave you room to review before the client’s deadline.
- Ownership of the work, transferring to you so you can transfer it to the client.
- Confidentiality, mirroring your client agreement.
Then pay them promptly. It’s tempting to wait until the client pays you, and some agreements use a “pay when paid” clause to formalise that. Whether that’s enforceable varies by country, and good subcontractors tend to avoid clients who pay late. Building a financial buffer means you can pay on time even when your own client doesn’t.
Frequently asked questions
Do I have to tell my client I’m using a subcontractor?
Check your contract first, since many client agreements require consent before you subcontract. Even where it isn’t required, telling the client is the professional choice. Explain who is helping, why it improves the result, and that you remain responsible for quality and deadlines.
What is a typical subcontractor markup for freelancers?
There’s no standard figure, but freelancers commonly add enough to keep a meaningful share of what the client pays, often in the region of 20 to 50 percent of the subcontractor’s cost. Work it out from your actual management time, risk and admin rather than picking a percentage, and check the total is still competitive.
Should I pay a subcontractor before the client pays me?
Usually, yes. Paying subcontractors on the agreed terms regardless of your client’s timing protects your reputation and keeps good people willing to work with you. “Pay when paid” clauses exist, but their enforceability varies by country, so a cash buffer is the more reliable answer.
Is a subcontractor the same as an employee?
No. A subcontractor runs their own business, controls how they do the work and usually works for several clients. An employee works under your direction on your schedule. Tax authorities look at the substance of the arrangement, not its label, so keep a written agreement and avoid treating a subcontractor like staff.
Where Billable comes in
Once someone else is doing part of the work, the money going out deserves the same attention as the money coming in. Billable’s contractor management keeps each subcontractor’s role, default rate and currency on file, and lets you assign them to a project as hourly, monthly or fixed, at the rate agreed for that specific job.
Every payout you record, with its amount, currency, date and status, lands on your dashboard next to your income, so you see what a project actually made after the subcontractor was paid rather than what it billed. Attach the agreement to their record and the terms live next to the payments. The help guide walks through it. It’s $9 a month, flat. Keep your margins visible.