Developing a Subcontractor Payment Model
My goal for 2013 was to expand Endress|Analytics and begin employing the use of subcontractors. It’s been a bit of a bumpy road, but things are starting to settle and the going is smoother. Now I can’t, for obvious reasons, disclose what I’m paying my subcontractors, but I thought I’d post my thoughts on how I am approaching my current subcontractor payment model, and why I think it actually works really well.
Basically the way my model works is this – when I get paid by our client for the work we’ve done, I then turn around and pay my subcontractor. My subcontractors earn a percentage of what I’ve billed my clients. By not paying my subcontractors until I’ve been paid, eliminates the stress of having to pay money that I may not have. It’s basically a revenue-sharing model.
I know this model is hardly unique, but I didn’t do any research on the best practices of how to pay subcontractors. I came up with this model completely on my own and I just wanted to share this with anyone who is considering hiring subcontractors, but is struggling with the best way to compensate them for their time. The reason I go with a percentage based model, rather than a fixed dollar / hour amount is primarily because my rates vary based on the type of project, the toolset being used, and any number of other factors. I feel doing a percentage-based revenue share is more fair for all concerned.
Are you a consultant or sole-proprietor? How do you handle paying subcontractors for their work?