.svg){kind=logo}
.png)
Hiring a subcontractor isn’t just about finding someone who can do the work. You also have to protect your team, budget and company from possible mishaps. Nail it and your projects hum along. Get it wrong, and you’re dealing with misclassification fines, missed deadlines, and messy offboarding.
However, great subcontractor relationships don't happen by accident. Rather, they're built on solid foundations, including clearly defined agreements, proper documentation, and upfront legwork that could save you months of headaches later.
Let's dive into the 10 essential steps to lock in legal safety, budget control, and project success from day one.
Step 1: Define Scope of Work & Roles
Before you draft a contract, get crystal clear on what you need. Start with a Statement of Work (SOW). This document clarifies all initial ambiguities and helps both parties remain accountable.
Your Statement of Work (SOW) should answer three key questions:
- What deliverables do you need?
- When do you need them delivered?
- Who owns what decisions while the work is ongoing?
Pro Tip: Skip the corporate fluff. Instead of "develop comprehensive marketing materials," try "create three email templates and seven Instagram posts by March 15th." The more specific you are, the better for everyone.
Step 2: Verify Legal Classification & Status
Misclassifying a contractor as an employee or vice versa can cost you fines, back taxes, and extra work for your finance team. Check these factors before you sign on the dotted line:
- Control: How much say do you have in how they do the work?
- Integration: Are they tied to your main operations or just a one‑off project?
- Economic reality: Do they work for multiple clients or just you?
Pro Tip: This is where RemotePass becomes your secret weapon. Instead of playing legal roulette across different countries, our platform automatically runs classification checks based on local labour laws. Think of it as having your compliance expert for every jurisdiction, minus the eye-watering legal fees.
Step 3: Confirm Insurance & Liability Coverage
Nothing ruins a Tuesday like discovering your contractor's mistake just cost you a client, and they have zero insurance to cover it. Without proper verifiable insurance, you may be liable for accidents, errors or omissions.
You can request various types of insurance coverages, such as:
- General Liability: Covers third-party injuries or property damage
- Professional Liability/E&O: Protects against work-related mistakes
- Workers’ compensation: Meets whatever local law demands.
- Cyber Liability: Increasingly crucial for any digital work
Pro Tip: Don’t just ask for insurance, verify it too—request Certificates of Insurance (COIs) straight from their insurer, then upload them into a central tracker. Also, set calendar reminders before any policy expires to dodge gaps.
Step 4: Draft a Comprehensive Subcontractor Agreement
Before work begins, put the deal in writing. A thorough subcontractor agreement keeps you covered when problems arise. At a minimum, your contract must include:
- Scope and deliverables: Reference your detailed SOW
- Payment terms: Rates, currency, schedule, and late fees
- IP assignment: Who owns the work product?
- Confidentiality: Protect your trade secrets and client data
- Termination: How either party can exit gracefully
Pro Tip: You don’t need a legal army for every deal. RemotePass auto‑generates locally compliant contracts, so you get bulletproof agreements without the hefty legal bill.
Step 5: Conduct Background & Reference Checks
A polished resume doesn’t guarantee quality work. Validate every contractor before you start. Proper checks cut the risk of missed deadlines and subpar deliverables.
Some important things to look out for include:
- Portfolio Review: Request specific examples relevant to your project.
- Client references: Speak with recent clients about the quality and reliability of our services.
- Credential verification: Confirm certifications and key skills.
Pro Tip: Use a standard questionnaire—ask if deadlines were met, how setbacks were handled, and what they’d improve. Reluctance to share specifics or past work is a red flag. RemotePass automates reference background checks, so you spot issues before they derail your project.
Step 6: Ensure Tax & Regulatory Compliance
Tax compliance may not be glamorous, but it's crucial. Before you pay a cent, collect the correct tax forms—W‑9 in the US, W‑8BEN for non‑US, or each country’s equivalent. Understand withholding rates, reporting deadlines, and local filing rules so you don’t face surprise bills later.
Pro Tip: RemotePass automatically gathers and stores the right tax documents for every jurisdiction and handles withholding calculations and filings for you. No more chasing forms or guessing percentages.
.png)
Step 7: Establish Payment Terms & Invoicing Process
Money conversations are awkward, but clarity from the start prevents relationship-ending disputes later. Set expectations upfront about everything from payment schedules to currency conversion.
To be able to do this properly, define:
- Hourly vs. fixed-price: Match the structure to your project type
- Payment schedule: Upfront deposits, milestone payments, or net terms
- Currency and conversion: Who handles FX risk and conversion fees?
- Late payment policies: What happens if you're slow to pay?
Pro Tip: Let RemotePass handle it. With real‑time exchange rates, transparent fees, and automated processing, contractors get paid on time in their preferred currency. No more juggling payment platforms.
Step 8: Set Communication & Project Management Protocols
Good communication keeps projects on track and cuts confusion fast. You and your contractor should align on:
- Primary channels: Slack for quick chats, email for formal updates, or your PM tool.
- Status reporting: Weekly updates, milestone check-ins, or daily standups
- Escalation paths: Who to alert and how, when a blocker arises.
- Response times: How fast to reply to urgent issues, questions, and routine updates.
Pro Tip: The key to hacking this is consistency. If you're using Slack for quick questions and email for formal updates, ensure everyone is aware of the rules. Mixed signals lead to missed deadlines.
.png)
Step 9: Onboarding & Training
Your contractor's first week sets the tone for the entire relationship. A smooth onboarding process doesn't just make them more effective, it signals you're organised and professional.
Here’s a checklist of essential things to prepare for a smooth onboarding process.
- Tool access: Give them logins for every system they need.
- Style Guides: Share your brand standards, templates, and tone guidelines.
- Security training: Walk through data handling and confidentiality rules.
- Internal contacts: Connect them with key stakeholders.
- The buddy system: Assign a go‑to teammate for questions and quick help.
Pro Tip: Create a simple onboarding checklist that covers everything from account passwords to tools and documents. When contractor #5 starts, you’ll be ready in minutes, not days.
Step 10: Ongoing Monitoring & Performance Reviews
The work doesn't stop once the contract is signed. Regular check-ins and performance monitoring help you catch issues early and build stronger working relationships.
This could vary based on the work, but you could set up various performance tracking frameworks, such as regular check-ins and project milestone reviews, to ensure that the subcontractor understands how they’re performing against set benchmarks and how they can improve, and vice versa.
Here are some questions to ask for regular check-ins:
- Are you getting the support you need to succeed?
- What's working well?
- What are the blockers?
- How can we improve next time?
Pro Tip: Great contractors are worth keeping. Use performance reviews to discuss contract renewals, expanded scope, or long-term partnership opportunities. The best subcontractor relationships evolve into strategic partnerships.
Simplify your Subcontractor Management with RemotePass
Managing subcontractors shouldn’t feel risky. The right prep and tools turn contractors into partners, not pitfalls. When you follow the steps covered in this article and add RemotePass to your tech stack, you get:
- Reduced risk through accurate classification and rock‑solid documentation
- Smooth delivery via clear expectations and real‑time communication
- Asset protection with airtight contracts and IP safeguards
- Budget control thanks to transparent payment terms
- Lasting partnerships built on shared success
Ready for truly global, compliant subcontractor management?
Book a demo or get started for free to experience seamless global hiring and payroll in over 150 countries.
.svg)
.svg)
