YOUR GUIDE TO BECOMING A SUBBIE
SO YOU WANT TO BECOME A ‘SUBBIE’ AKA SUBCONTRACTOR
It’s not easy – otherwise everyone would do it. There’s a lot involved in running your own operation, and a very real risk that you’ll go broke. However, the pay off could be huge and well outweigh the risk.
What is a subcontractor? A subcontractor is hired to do a particular piece of work for somebody else. They range from one-man operations to firms with hundreds of employees. A subcontractor has specific abilities and tools required by a contractor to complete a project.
Remuneration and conditions As a regular employee, you’re paid a standard wage or salary that is agreed upon when you commence employment. A subcontractor sets their own rates. You work out the requirements, the costs associated, a contingency and then put a bundle of profit on top.
Differences between a SUBBIE and an employee
EMPLOYEES
SUBBIES
Boss controls how work is performed.
Subbie does work their own way.
A part of the business, usually work in a regular, ongoing basis.
Stand-alone as their own business, can work for multiple businesses at the same time.
Paid under an employment contract.
Issue an invoice in order to be paid.
Boss supplies equipment and materials.
Subbie supplies own equipment and materials.
Boss handles tax, super and workers’ comp.
Subbie handles own tax and super.
Represents the boss’ business.
Represents themselves or own business.
A contractor decides how to do the job; an employee is told how to do the job.
SETTING UP YOUR BUSINESS
As a subcontractor,
you
are responsible
for every aspect of setting up and running your business.
Business structure Your business structure depends largely on one thing – how many people are involved. Most subcontractors are Sole Traders. A Sole Trader is a self-employed person who operates their business alone. Some subcontractors are Partnerships, and comprise of around 2 to 4 partners. If you operate as a Sole Trader or in a Partnership, you are liable for business debts. A Company is different from a Sole Trader or Partnership because it is a separate legal entity – it holds its own debt, rather than the people who formed the Company.
GETTING AN ABN IS
FREE
ABN You’ll need an Australian Business Number (ABN) to operate as a subcontractor. CLICK HERE
TO APPLY FOR AN AUSTRALIAN BUSINESS NUMBER (ABN)
Business Name It’s not legally necessary to register a business name. If you operate as a Sole Trader and under your own name, you won’t need to register a business name.
CLICK HERE
To register a business name VIA THE Australian Securities & Investment Commission
Licences Make sure you are covered under the proper subcontractor licences to carry out business. In some states, you only need a licence if the work exceeds a certain cost threshold; NSW, for example, is $5,000. You will also need to meet qualification guidelines; contact your state governing bodies for further information.
Insurance cover Insurance is key to your survival as a going concern. There are many different types of insurance – some are mandatory, some essential and some nice-to-haves. These include: Income Insurance
Public Liability INSURANCE
Tools & Equipment Insurance
At the very least in most states, you will be required to obtain public liability insurance in order to qualify as a subcontractor.
CLICK HERE
A useful website by Insurance Council of Australia could help with all your questions
RUNNING YOUR BUSINESS
Sourcing equipment If you’ve worked in your industry for a while already (always a solid option before branching out on your own) then you’ll have a good idea of where to source your basic tools. For many small to medium business owners, it can be difficult to strike the balance between taking opportunities to grow business and investing in the equipment to support growth. New and even established businesses can find it difficult to secure traditional finance for equipment. Rent-to-own funding is specifically designed for industry, making it the ideal choice. Contact GoGetta if you’d like to know more about how we can help you capitalise on your potential.
Finding work Industry experience will help you a lot, however you’re still going to have to do some legwork to bring in new customers. To keep the work rolling in, consider these advertising options:
LOCAL PUBLICATIONS
ONLINE DIRECTORIES
GUMTREE
SOCIAL MEDIA
Facebook is your friend.
BROCHURES
And promotional material.
TENDERS & QUOTES
Pages in the daily newspaper.
FACE TO FACE
It’s expensive – but the best way to build your business is pound the payment.
WEBSITE
Make sure your phone number, email address and what services you offer are prominent.
ONLINE PLANT HIRE
If you’re an owner-operator of equipment or machinery, places such as iSeekplant.com. au can be a great source for getting on board major projects. The key to finding work is getting your name out there and delivering great customer service. Remember, word-of-mouth and referrals are powerful business builders!
Negotiating contracts Negotiating is an art that takes a lot of practice. It won’t come naturally, and you’ll need to work at it and refine your skills. Consider the below when negotiating your contracts:
UNDERSTAND THE PROJECT. Know what the head contractor wants, and when he wants it.
BE REAL ABOUT COSTS.
Don’t undercut; you don’t want to go hat in hand to the project manager and ask for more money. On the same note, you never want to make a loss.
HAVE AN HONEST SCHEDULE.
Always expect the unexpected. Know how long it takes to do things, and add a 10% buffer.
ESTABLISH PARAMETERS FOR A DISPUTE RESOLUTION.
You don’t want the project to come to a standstill because there are no guidelines for handling problems.
UNDERSTAND WHO YOU’RE WORKING WITH.
Who else will be on site, and what work will they be doing?
BE CANDID.
Be very clear about what you can do, and what you expect from the head contractor. Be honest and upfront about everything during the negotiation stage. There’s no point taking a job you can’t handle if it will reflect poorly on your reputation.
Resolving disputes There’s no catch-all way to resolve disputes, but here are some tips: Ensure there is a dispute resolution structure set out in the contract Focus on mediation and finding a middle ground before escalating issues. Speak to a lawyer
Sometimes, despite your best efforts, unforeseen circumstances will crop up and throw a spanner in the works. Maintain your professionalism and understand that every action you take can influence your ability to get work in the future. Even if you’re not at fault, handling it well can still leave a favourable impression with the head contractor.
Managing finances Correctly managing your finances is absolutely fundamental to success as a subcontractor. You need to be able to maintain cash flow, pay your bills on time, and have money set aside for contingencies.
Speak to an accountant
OR
financial planner
About preparing a reasonable budget.
Sometimes you will inevitably end up in a tight spot and need to borrow money to keep afloat. Speak to your accountant, financial advisor or commercial finance broker before doing this, as they often have access to better deals than you can find yourself. If you’re looking for equipment, chat to the team at GoGetta.
You wouldn’t let your accountant fix your plumbing so you shouldn’t be taking care of your own tax.
Tax (including GST) Again, this is one that’s best left up to the professionals. As a Sole Trader, you’ll be taxed at the standard income tax rate. CLICK HERE
TO View the income tax rates for 2016/17
CLICK HERE
TO Determine your taxable income
GST RATE =
10%
GST The Goods and Services Tax is a 10% levy applied to the vast majority of goods and services in the Australian economy. As a subcontractor, essentially all the work you do will be subject to a 10% tax rate. It’s important to include this when you quote for jobs. Many subcontractors will include it on quotes and invoices as a separate charge. For example, $400 for the work, plus GST, equals a charge of $440. If you generate more than $75,000 in revenue, you’ll need to register for GST with the ATO.
You are responsible for paying the GST on work you carry out, so always ensure you pass the cost onto your clients. REGISTER WITH THE ATO
SUPER =
9.5%
Superannuation You will also be required to make super contributions for your employees, while also setting aside something for your own retirement. The current superannuation rate is 9.5% of ordinary time earnings. This is expected to rise over the coming years, so be sure to update your knowledge every six months or so. VISIT THE ATO
FOR MORE INFORMATION
Workers’ compensation As a general rule, subbies are not entitled to workers’ compensation unless they have arranged their own cover. However, this can vary from state to state. For example, in Victoria, Work Cover can often apply to all contractors, even those who operate under a Company Business Structure.
Occupational Health and Safety If you’ve worked on worksites for a while, you likely have a love/hate relationship with OH&S. As a subcontractor, the same rule applies to OH&S as everything else – it all comes down to you. Subbies often have specific workplace health and safety requirements on projects. Often this will involve an OWHS induction that can go for between
30 MINS
TO
HR1
HR
depending on the project. Please take into account this time prior to arriving at the job site for yourself and any employee.
Ensure your work environment is safe for you and those around you. You are liable if somebody injures themselves as a result of your negligence, so follow site safety best practices.
LIFE AS A ‘SUBBIE’ CAN BE TOUGH AT TIMES
However, the payoff can be huge. Decide if it’s the right course for you, and start chatting to professionals today. Subcontracting can help you get the licences and accreditation you need to help grow your business. If you need to finance equipment or machinery, chat to GoGetta for flexible options and great advice.
P 1800 173 284 E ask@gogetta.com.au w w w.g o g e t ta .c o m . au