Working with subcontractors without losing the margin
Bringing in help solves a capacity problem and creates a management one that is rarely priced.
A studio at capacity subcontracts. The arithmetic looks straightforward — bill the client, pay the freelancer, keep the difference — and the margin is consistently thinner than expected.
The management time is the missing cost
Briefing, reviewing, correcting, chasing, and being accountable for the result. On a first engagement with someone new, this can be a third of the subcontracted hours. When subcontractors are distributed, remote workforce management software can centralise basic coordination, while the commercial model still has to account for management time.
Unpriced, it eats the margin entirely. The realistic markup on subcontracted work reflects that management overhead rather than being a simple percentage.
If you are accountable to the client for the output, you are doing work whether or not you produce the deliverable. That work is billable and is usually given away.
Brief in writing
The most common cause of subcontracted work coming back wrong is a verbal brief. Written scope, deliverable format, deadline, and what the client actually cares about. Where contractor status affects the relationship, GOV.UK guidance on self-employed contractors provides useful legal-context guidance.
Include the context: what this is part of, what has already been agreed, what the constraints are. Subcontractors given only a task produce a task-shaped answer, which is often not what the project needs.
Agree the commercial terms explicitly
- Rate, and whether it is fixed or hourly. If hourly, an agreed cap.
- Payment timing — and whether it is contingent on your client paying, which needs to be stated up front rather than discovered.
- Revisions included in the price.
- Who owns the intellectual property, and its onward transfer to your client.
- Confidentiality, and whether they may reference the work.
The intellectual property chain is the one that causes real problems. You cannot assign to your client rights you never obtained from your subcontractor, and this surfaces at the worst possible moment.
Classification is a real risk
A long-term subcontractor working set hours, exclusively, under your direction, with your equipment, looks like an employee to tax authorities in most jurisdictions regardless of the agreement.
The liability is retrospective and falls on the engager. Worth an accountant's view before an arrangement becomes long-standing, and worth reviewing annually because these relationships drift.
Decide what the client knows
Whether you disclose subcontracting is a judgement, and being caught concealing it is far worse than disclosing it. Some contracts require consent for subcontracting — worth checking before rather than after.
Most clients are unconcerned provided the accountability is clearly yours and the quality holds.