The way subcontractors are paid is a big deal. They’re the lifeblood of our industry and you need them to survive, so they should be paid on time and in full, always. Stretching them out will give you a bad reputation, and that’s hard to shake. These guys know who’s paying on time and who isn’t. Good companies have service providers waiting to work for them because they’re always dependable.
When paying subcontractors by the hour, consider a "differential system" depending on the type of equipment they use. Start with a base rate that’s fair, and pay more for larger and better plows (such as a ‘V’ blade, snow wings, or capture blade). Increase the compensation for their second and/or third year. Offer more to drivers with an automatic transmission instead of a manual. (No matter how much they plead, drivers simply can’t back up as fast with a standard transmission.)
Always be careful how you designate subcontractors while they’re working for you. Everyone needs to understand that they are independent service providers and not employees. (So keep your logo off their trucks and equipment.) And while you can give them direction, limit it to fulfilling your customers’ expectations per the contract.
Workmen’s compensation laws vary from state to state, so always be sure all subcontractors carry the proper insurance. Never pay anyone until they fill out an IRS Form W-9, and keep a copy of it in your files. Always issue a proper IRS Form 1099 at the end of the year, and let the service provider know all income will be reported to the government as required by law.
Finally, don’t forbid subcontractors from plowing for themselves or others – if you treat them well and pay as promised, they’re not likely to go anywhere else.
Using subcontractors is one of the easiest ways to grow your business without a substantial capital investment. Treat them right, and they’ll be loyal and productive members of “your team.”