EMPLOYEE VS SUBCONTRACTOR.
Most contractors make this call on habit or on capacity rather than on a disciplined financial comparison. The comparison that works puts your fully loaded employee cost per hour, wage plus every burden item plus an overhead allocation, against the subcontract rate for the same scope at the same quality and reliability. The lower number wins, but only where quality, reliability, and classification compliance are equal, and the third one is where contractors get hurt.
The mistake almost everybody makes is comparing a base wage to a subcontract rate. A base wage is one line inside a cost, and once FICA, FUTA, SUTA, workers comp, health coverage, retirement, and PTO go on top of it, the hour is a different number entirely. Then there's the utilization question underneath it: an employee you can't keep busy costs you the idle hours too, and a subcontractor you can turn off doesn't. Both of those belong in the comparison before anybody decides anything.
WHAT IT MEANS.
The employee versus subcontractor decision is the choice to self-perform a scope with your own crews or buy it from a subcontractor, and it drives labor cost, financial risk, cash flow, IRS compliance, and how far the business can scale.
Using subcontractors moves some risk off your books and not all of it. If a sub performs poorly you're still answerable to the GC. If a sub doesn't pay their suppliers, your project can get liened. If a sub walks off, you're finishing their scope at your cost. Those exposures belong in the financial analysis as a real number rather than as a footnote.
WHY THE MATH NEVER WORKS OUT.
You're deciding without the true cost numbers
The comparison requires knowing your fully loaded employee cost per hour, not just the base wage, and setting that against the subcontract rate for the same work at the expected quality and reliability. Most contractors compare a base wage to a subcontract rate and then wonder why the math never seems to work out. It never works out because one side of the comparison is missing half its cost.
IRS misclassification is a serious financial risk
Treating workers as 1099 subcontractors when they meet the IRS definition of employees creates real liability: back payroll taxes, penalties, interest, and potentially back benefits. IRS and state labor department audits of construction companies are common rather than rare. Misclassification that looked like a cost saving becomes an expensive problem the day it's discovered.
Subcontractor risk gets underestimated
Using subcontractors moves some risk off your books but not all of it. If a subcontractor performs poorly you're still answerable to the GC, if they don't pay their suppliers your project may be liened, and if they abandon the work you finish it at your cost. Those exposures need to be inside the financial analysis rather than discovered on the job.
HOW THE DECISION GETS MADE.
Employee cost per hour is the base wage plus all burden, FICA, FUTA, SUTA, workers comp, health, retirement, and PTO, plus an overhead allocation. Subcontractor cost per hour is the subcontract rate plus your cost to manage that subcontractor, meaning administrative time, insurance monitoring, and lien waiver management. Compare those two figures at your expected utilization rate for the work, and the lower number wins where quality, reliability, and classification compliance are equal.
The IRS applies a multi-factor test covering behavioral control, financial control, and the type of relationship. A construction worker who works only for you, uses your tools, works your hours, and follows your direction is almost certainly an employee regardless of how they're paid or what the contract says. SPM coordinates with your CPA on classification questions and makes sure the 1099 payments in your books are going to legitimate independent contractors.
When the decision is a large one, adding a crew, bringing a trade in-house, or expanding into a new scope, the choice gets a financial model rather than a conversation. True employee cost at expected utilization against the subcontract rate, adjusted for subcontractor reliability and classification exposure. The decision ends up sitting on arithmetic and not on a gut call.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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