Subcontracting and Liability: What Happens When Things Go Wrong?
- JLAJLA
- Apr 20
- 2 min read
Intro
You’ve got more work than you can handle and a network of reliable subcontractors. But what happens if one of them misses a deadline, breaches confidentiality, or causes a loss for your client?
This post breaks down how subcontracting affects your liability and legal risk—and how to protect your business when you’re not the one doing the work directly.
Why It Matters
Many service businesses grow by outsourcing—but few realise that using subcontractors doesn’t shift the legal responsibility. If something goes wrong, the client will come to you, not your subcontractor.
If your agreements aren’t clear, you could be left covering the cost, fixing the mistake, or dealing with reputational fallout—all for work you didn’t personally deliver.
What You Need to Know
You’re Still on the Hook
In most client contracts, you’re responsible for delivering the service—even if someone else does the work. That means you wear the liability if:
A subcontractor delivers substandard work
Deadlines are missed
Confidential information is mishandled
Someone gets injured or property is damaged
Your client contract needs to account for this risk, and your subcontractor agreement needs to pass it back down the line.
You Need a Proper Subcontractor Agreement
Working with someone you trust? Great—but you still need the right paperwork. A proper subcontractor agreement should cover:
Scope of work and deadlines
Payment terms and tax responsibility (so you’re not liable for their super or PAYG)
IP ownership and confidentiality
Liability and indemnity clauses
What happens if things go wrong—or if the relationship ends
| Worth Knowing: If you don't clearly classify a subcontractor, they could be deemed an employee—exposing you to superannuation, tax, and workers comp liabilities.
Align Your Contracts
Make sure your subcontractor agreement aligns with your client contract. If you’ve promised your client a five-day turnaround, but your subcontractor agreement says ten—you’ll be stuck in the middle.
Think of your business as a chain of responsibilities. Every link needs to hold.
Commercial Insight
Subcontracting is a smart way to grow—but it only works if the risk is managed properly. Clear agreements mean you can scale without sacrificing your brand or taking on unnecessary liability.
You want subcontractors to feel like trusted partners—but treat them like commercial operators, with legal clarity to back it up.
What to Do Next to Manage Your Liability when Subcontracting
Review your client agreements—do they allow subcontracting, and who’s liable?
Put subcontractor agreements in place, even for long-standing relationships
Align scope, timelines, and deliverables across both agreements
Check insurance coverage—does it extend to subcontractors?
Being clear upfront keeps relationships strong and protects everyone involved.
Closing Wrap / CTA
Subcontracting can unlock growth—or create legal headaches. I help service-based businesses put proper contracts in place that protect revenue, manage liability, and set clear expectations. If you’re outsourcing any part of your work, now’s the time to get your documents sorted.
Comments