Is Direct Hiring the Right Solution for the Construction Industry?

Is Direct Hiring the Right Solution for the Construction Industry?

3 construction workers sitting on machinery
••• Rainer Elstermann / Getty Images

Subcontracting vs. Direct Hiring? Sometimes you will wonder when does it make sense to hire an employee or to subcontract it out. Many models in the construction industry suggest that subcontracting can be easier and faster than direct hiring, but every situation must be carefully analyzed and assessed before making a decision. Subcontracting can offer you some warranties and hiring someone directly will require additional efforts from you, not to mention the costs and burden associated with it. But what is the best decision? Well, we cannot answer that simple question without analyzing further in details the description and kind of job that you are trying to complete.

When Is a Subcontractor Needed?

Subcontracts in the construction industry are the preferred method of doing business used when affronting complex situations. Although it will require some additional legal steps and precautions, when completing or servicing specialized areas it is the best way to manage a job without adding personnel and overhead costs. The benefits of using subcontractors are:

  • Useful if the project scope is too broad for the contractor
  • Can free up time and resources so you can concentrate on growing your construction business
  • Usually less expensive than hiring a full-time employee
  • A construction contract must be written to ensure warranties of the service being provided
  • A subcontractor must provide its own equipment
  • Reduce the payroll taxes and benefits being paid
  • Payment can be used as a tool to negotiate for completed and accepted jobs
  • Construction contracts can be terminated easily
  • Can provide you with additional knowledge and resources
  • Legal responsibility could be transferred to the one executing the job
  • Your organization can vary in size from one day to the other
  • Cna be used as needed and will not consume your time and resources


  • Loss of control over the quality and timeliness of work, however, this can be controlled by adding additional staff or management
  • Misrepresentation of a contract can lead to severe fines by IRS.
  • Some employees can turn mad thinking that they could be replaced
  • Normally follows its own rules, if not stated differently
  • Performance criteria can be an issue
  • Will prevent you from developing your own staff
  • Time must be spent analyzing and reviewing other company's work

When Direct Hiring is the Best Option

There are some cases when you need to hire someone directly for a construction job and create your own staff to handle projects. Usually, routine 'simple' construction jobs are the ones assigned to directly hired employees. Direct hiring method for construction jobs will give you assets, the most important ones; your workforce. If you decide to hire someone permanently, you must consider for how long does the employee will be needed and the benefits that you will get when hiring someone. Direct hire can also have some benefits:

  • The company will have immediate results
  • The employee will provide continuity to your ideas
  • The rules are set by the employer
  • The employee can provide multitasking services and serve in different construction trades
  • A direct hire can provide great input knowing the specific needs of your construction company
  • Employees can be trained to do specialized construction jobs
  • Quality control can be closely tracked
  • Work hours can be better defined
  • A company with employees is better looked than construction companies performing only with sub-contractors
  • Employees are always available
  • The construction cost can be 'controlled.'
  • Direct hiring should be used when loyalty and long-term relationships are desired

On the other hand, these are some of the drawbacks of direct hiring

  • Will add overhead cost for your construction company
  • Tools and equipment must be provided
  • Employees have broader rights when compared with sub-contractors.(This can also be a benefit)
  • Taxes and benefits will be added to the employees' paycheck and your operational costs
  • When using a direct hire, production and quality must be measured, but it will be harder to keep track of it
  • Requires training and additional resources that will cost you money but that will generate positive results for your organization

It is up to you the decision on how to get your workforce. Remember to check with the IRS and with your local or state agency's to assure that you are doing things correctly.