Subcontractor vs Employee: Which Is Right for Your Building Firm?
The short answer
Subcontract trades you need for part of a job who run their own business. Employ the people you need every week, under your control — status follows how the work really happens, not the paperwork.
- It is a status question first, a cost question second. HMRC looks at how the work really happens, not what you call it.
- Real subcontractors quote, invoice and run themselves. Employees work regular hours for you only, under your supervision, with your tools.
- Under CIS you must check status. You can get a penalty if a 'subbie' should have been your employee. HMRC's CEST tool gives its view.
- Employ the core, subcontract the peaks. Site leads and weekly multi-trades are usually employees; specialist trades and peak work usually subcontract.
Every builder who grows hits the same question: do I take people on, or keep using subbies? Most decide on day rate alone. That misses the bigger risk.
In UK construction, subcontractor vs employee status depends on how the work really happens. Under the Construction Industry Scheme (CIS), it is your job as the contractor to get it right.
This guide covers the status test, the real cost of each option, and which roles growing building firms usually employ first. To plan the team your jobs actually need, book a free strategy call.
The status test: how HMRC tells the difference
HMRC does not care what your agreement calls someone. It looks at how they actually work.
| Usually a subcontractor | Usually an employee |
|---|---|
| Quotes or bids for the work | Works regular hours, expects to be paid for time |
| Sends you invoices | Paid through payroll |
| Not directly supervised | You or your site lead direct their workload |
| Pays their own tax and NI | You deduct tax and NI |
| No holiday or sick pay | Gets paid holiday and sick pay |
| Can work for other contractors | Only works for you |
| Brings own tools | You provide tools, materials and equipment |
| Could send someone else | Cannot send someone else in their place |
If most of the right-hand column describes someone you pay as a subbie, you have a problem. Use HMRC's free Check Employment Status for Tax tool for anyone in doubt. HMRC says it will stand by the result as long as the information you gave is accurate.
False self-employment and CIS
Under CIS, a contractor must check whether they should employ a person instead of subcontracting the work. You must also verify every subcontractor with HMRC before paying them, and deduct at the rate HMRC gives. HMRC can charge a penalty if someone you paid as a subcontractor should have been your employee.
The classic risk on small building firms is a labourer or multi-trade paid a day rate "under CIS". They have worked only for you, five days a week, for a year. They use your van and tools on your sites, and you tell them what to do every morning. On paper a subcontractor. In practice, very likely an employee.
Assuming a CIS registration settles it. CIS is how tax is deducted from a subcontractor's payments. It does not make someone self-employed if they work like an employee.
The same goes for insurance: a labour-only worker you direct is usually treated as your employee. See employers' liability insurance for subcontractors.
This is general information as of October 2026. If you have people in this position now, speak to your accountant.
Still not sure whether to employ or subcontract?
Book a free call with our team. We'll look at your jobs and margins and plan the team you actually need.
The real cost of each
An employee costs more than their wage. Take an £18-an-hour worker on 40 hours a week under 2026/27 rules. Add employer NI (15% above £5,000) and pension (3%), and they cost about £43,242 a year. After 5.6 weeks' holiday and lost time, that is about £27.40 per chargeable hour.
A subcontractor's day rate is usually higher, but:
- You pay only for the days you need. No cost when the job is between stages.
- No employer NI, pension or holiday pay.
- They usually bring their own tools and carry their own downtime.
An employee wins when you have steady work for them every week. It also wins when you need control over how, when and to what standard the work is done. The more weeks a year you would book the same subbie, the closer the maths gets.
Want us to run the employ-or-subcontract numbers on your jobs?
Book a free call.
Who to employ, who to subcontract
A pattern that works for many growing building firms:
- Employ: admin or office support. Calls, bookings, invoices, chasing. Usually the first hire. See hiring your first employee.
- Employ: site leads and core multi-trades. People you need every week, working under your direction, representing your company on site.
- Employ, later: estimator and project manager. Core roles that hold your systems.
- Subcontract: specialist trades. Electrics, plumbing, plastering, roofing, tiling, groundworks, booked per job against the programme.
- Subcontract: peaks. Extra gangs when two jobs overlap.
Adam and Ali did exactly this. They employed two full-time multi-trades as the core and subcontracted the delivery of their £49K and £12K jobs, while Adam moved to sales.
Can't find people to employ at all? Here is where UK firms find workers in 2026, including funded apprentices.
Making subcontracting work
If you subcontract, run it as a system:
- Two or three subbies per trade.
- Written scopes and rates, and bookings from the programme.
- Signed variations and a score after every job.
- Payment on time.
The full method is in how to manage subcontractors. For the difference between being a main contractor and a subcontractor, see contractor vs subcontractor.
Building the team with a mentor
Clients grow teams fast when the structure is right. Oleg built a team of 10+ within two months of starting his company. Individual results, not typical or guaranteed.
Sviat Jay runs Craftex, a London design and build company, and mentors owners one-to-one himself. He looks at your jobs, margins and strengths and plans the team around them. The flagship is one-to-one, by application. Smaller firms start in small groups (max 10–20) with regular one-to-ones.
BizMentor mentoring aims for results in about 4 months rather than 1–3-year programs. The 4-minute Construction Business Scorecard shows where your team structure is holding you back.
Ready to build the right team? Book a free strategy call.
Check your team this month
Tax and employment points are general information as of October 2026, not advice. Check your situation with your accountant.
Employ or subcontract: this month
- List everyone you pay and how many weeks a year they work for you
- Run anyone who works only for you through HMRC's CEST tool
- Check every subcontractor is verified for CIS before the next payment
- Cost your core roles as employees at the true hourly rate
- Decide which roles are core and which are per job
