When you hire another contractor to do part of a job, a handshake works fine until something goes wrong: the electrician's work fails inspection, the drywall sub walks off halfway through, a supplier files a lien on the owner's house because your sub didn't pay for materials. A written subcontractor agreement settles most of those questions before they come up.
This free subcontractor agreement template gives general contractors and trade contractors a plain-English starting point with the clauses most subcontracts cover. Download it as an editable Word document or a printable PDF with the buttons above.
This is a template, not legal advice. Construction contract law varies a lot from state to state, especially on indemnity, payment terms, retainage and liens. Fill it in, then have a local construction attorney review it before you use it on a real job.
What's in the subcontractor agreement template
The template runs to two Letter-size pages and includes:
- Your business details, agreement number, date, project number and the date of the prime contract with the owner
- The parties: your business as Contractor and the subcontractor's business, address, license number and trade
- Project and price: project name and address, owner, subcontract price (lump sum or unit prices), start date and substantial completion date
- Fifteen numbered clauses:
- Scope of work
- Price
- Payment and retainage
- Schedule
- Changes (signed change orders before work)
- Insurance and additional insured
- Indemnity
- Warranty
- Liens and lien waivers
- Independent contractor status and Form W-9
- Licenses, permits and laws
- Safety and cleanup
- Termination
- Disputes and governing law
- Entire agreement
- Signature lines with printed name and title for both parties
Replace everything in [square brackets], delete the options you don't use, and attach the exhibits the agreement refers to: the plans and specifications (Exhibit A) and the price and payment schedule (Exhibit B).
How to fill in the key clauses
Scope of work. The most important clause and the most common source of disputes. Name the trade, the areas, the drawings and spec sections, and who supplies what. Then list exclusions just as carefully: "Excludes patching and painting after rough-in" saves an argument later. If the sub is pricing from your plans, reference the exact plan set and date.
Price and payment. State whether the price is a lump sum or unit prices, how often the sub invoices (monthly or at milestones), how many days you have to pay, and how much retainage you hold back, if any, and when it's released. If you want to tie the sub's payment to the owner paying you, have your attorney write that clause for your state.
Changes. Require a written change order, signed by both parties before the changed work starts, stating the scope, the price change and the schedule change. Our change order template is built for exactly that, and it works between you and a sub as well as between you and the owner.
Insurance. Fill in the limits you require for general liability, auto, workers' compensation and employer's liability (and umbrella, if you use one), and ask to be named as additional insured on the sub's general liability policy. Your own insurer and the owner's contract usually dictate the minimums, so ask your agent before you fill in the numbers. Get the certificates before the sub sets foot on site, not after.
Indemnity. The template uses a "to the extent caused by" clause: the sub covers losses caused by its own negligence or fault. How far an indemnity clause can go depends on state law, so this is a clause your attorney should adapt.
Warranty. One year from substantial completion is a common starting point. Match it to the warranty you give the owner: if you promise the owner two years on workmanship, a one-year warranty from your sub leaves you covering the second year alone.
Liens and lien waivers. The clause asks the sub for a conditional lien waiver with each payment request and an unconditional waiver for the previous payment, and for waivers from its suppliers where you require them. See the section on lien waivers below.
Termination and disputes. Fill in the cure period (how many days the sub has to start fixing a problem after written notice), choose between mediation and arbitration before court, and name the state law and county that apply.
Subcontractor or employee? What the IRS looks at
Calling someone a subcontractor in a contract doesn't make them one for tax purposes. The IRS weighs all the evidence of control and independence in the relationship, grouped into three categories:
- Behavioral control: does your company control, or have the right to control, what the worker does and how they do it?
- Financial control: do you control the business side of the job, such as how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies?
- Type of relationship: are there written contracts or employee-type benefits such as a pension plan, insurance or vacation pay? Will the relationship continue, and is the work a key aspect of your business?
The IRS says no single factor decides the question. If you treat an employee as an independent contractor without a reasonable basis, you can be held liable for employment taxes for that worker. If you're unsure, either you or the worker can file Form SS-8 to ask the IRS to determine the worker's status; the IRS notes it can take at least six months. The template's independent contractor clause describes a real subcontractor relationship (the sub controls its means and methods, provides its own tools and pays its own people), but the clause only helps if the relationship actually works that way. Your state may apply its own tests for its taxes and labor laws; ask your accountant or attorney.
W-9s and 1099s for subcontractors
Ask every subcontractor for a completed Form W-9 before you pay them. The W-9 gives you their correct taxpayer identification number, which you need to file information returns with the IRS.
At year end, Form 1099-NEC reports what you paid non-employees for services. The IRS instructions set the reporting threshold at $2,000 or more for payments made in tax years beginning after 2025 (it was $600 before), and say it may be adjusted for inflation starting in 2027. Payments to corporations are generally exempt, with exceptions such as payments for legal services. Form 1099-NEC must be filed with the IRS and sent to the subcontractor by January 31. Our guide on how to pay contractors in QuickBooks walks through collecting W-9s and e-filing 1099s, and QuickBooks for contractors covers coding sub costs to each job.
Lien waivers: why they matter
Unpaid subcontractors and suppliers can often record a mechanics lien against the property they worked on, even when the owner has paid the general contractor. California's Contractors State License Board (CSLB) spells this out in the mechanics lien warning of its sample home improvement contract: even if a homeowner pays the contractor in full, unpaid subcontractors, suppliers and laborers may record liens, and the homeowner could be forced to pay twice. That's why lien waivers travel with every payment between owner, general contractor and subs.
CSLB also explains how waivers are used in practice. It tells homeowners to get a signed conditional release from possible lien claimants before making a payment, and an unconditional release from each claimant after they're paid. CSLB adds that, by law, a homeowner can withhold the next payment until they get the unconditional releases for the previous one. Owners will ask you for those releases, and you can only provide them if your subs provide theirs.
Some states set the exact form a lien waiver must take. The template tells the sub to use the statutory forms where state law requires them; ask your attorney which forms, if any, apply in your state.
Safety on a shared job site
Under OSHA's multi-employer citation policy, more than one employer may be cited for the same hazardous condition on a multi-employer worksite. OSHA describes four roles: the creating employer that caused the hazard, the exposing employer whose own employees are exposed to it, the correcting employer responsible for correcting it, and the controlling employer with general supervisory authority over the worksite, including the power to correct violations or require others to correct them. OSHA says that control can be established by contract or by exercising control in practice, so a general contractor running the site can be a controlling employer even when a sub created the hazard. That's why the template makes the sub responsible for its own crew's safety and for following the project's safety rules, and why you should still walk the site.
Before your subcontractor starts work
- Signed agreement, with the scope and plans attached
- Certificates of insurance showing the coverage and additional insured status you asked for
- License checked with your state licensing board, for the trade and the job's size
- Form W-9 on file
- Lien waiver forms agreed (the statutory ones, if your state has them)
- Schedule and site rules shared: hours, parking, safety meetings, cleanup
If you're bidding the work out, construction bidding software can send plans to subs and collect their prices in one place. To price your own part of the job, start from our contractor estimate template.
