Why Is Subcontracting Bad
April 19, 2022 | Katy Yanossy
Knowing who you`re outsourcing to – inexpensive but not competent or reputable service providers – those who don`t follow work orders or follow MFS company procedures and guidelines when filling out a work order – can cause you to hold the bag. Depending on what this subcontractor does or does not do, the cost to you can be significant. Alternatively, a competent and reputable service provider may charge more, but the additional costs make sense in the long run. Paying a little more is worth it, as better and more reliable service usually means fewer downtime headaches later. When a service outage occurs, you often have little control over the extent of the headaches, especially if your submarine doesn`t have the right insurance policy or coverage. Any standard retail transaction is quite simple, a buyer gives money to the seller in exchange for goods. If the goods do not work, the solution options are simple and the problem is easily solved. This is not the case with subcontracting, where work often depends on many other parties and approval is subjective. Many problems can occur on a construction site outside the control of a subcontractor, but they can cause them problems. These issues can cause subcontractors to need some degree of flexibility to coordinate with all other parties on the ground and are another pressure on cash flow.
Cash is king in any business, and it`s no different for subcontractors. Not surprisingly, the most common reason why supplier companies fail is that they run out of money. This happens most often because some entrepreneurs, while good builders, are not good at running a small business and can often leave the financial side of operations unattended. Add to that the expectation that most subcontractors are supposed to circulate the cost of a project, and you have a recipe for disaster. We looked at this and other main reasons why subcontractors have traditionally failed. Once you`ve decided to be a subcontractor, your mileage starts to vary. You are responsible for paying your taxes instead of letting your contractor`s human resources department take care of it. In addition, you are forced to track the inflows and outflows of your money because no one will do it for you. As an independent contractor or freelancer, you may also have to pay an even higher self-employment rate and a quarterly tax estimate, depending on how much you earn in your outsourcing business. The most common reasons for subcontracting are time savings (average = 2.04), cost reduction (average = 2.07), absorption of price fluctuations (average = 2.20) and access to specialized skills that are lacking in the company (average = 2.57). .
There is nothing fundamentally wrong [with outsourcing]. . Subcontracting certainly has its place as part of a business strategy. The problem is that we do not also take into account the disadvantages of this subcontracting. And especially where we have workplace laws, public policies that don`t take into account the fact that more and more of this work that was once done by large corporate organizations is done this way. And that`s why we don`t provide the people who do this work with the adequate protection they need. Historically, one of the ways in which the major chemical producers in this country have dealt with health and safety, the growing problem and the growing pressure of passing the [Occupational Safety and Health Act] in 1971, for example, to treat workplace injuries, has been to find ways to move some of that work outside the boundaries of the organization. And we see it again in many industries where we now deal with outsourcing, in newer places. Aside from the value of comedy, the only truth that needs to be told here is “you get what you pay for.” The assumption is that each person in the chain was “worth” the payment they were promised to make to do the job; Not that the work “costs” a certain amount.
The difference between “value” and “cost” is “profit”. At a basic level, outsourcing means paying someone else to do something you can either: a) do but choose not to; or b) can`t do but have convinced someone you can finish. In both cases, the goal is to make a profit while “doing” as little as possible. Without adequate protection, the contractor is at the mercy of the subcontracted person. If the subcontractor is reputable, competent and reliable, outsourcing can be a more efficient use of resources – that is, a higher profit. .