What subcontracting is and what paying piecework is
Subcontracting means delegating part of the job —a scope, a specialty or a whole work front— to an outside company or crew that performs it with its own people, its own tools and under its own responsibility. You sign a contract for a defined scope (for example, "all the electrical work" or "the plaster on the 20 units") and that company answers for its personnel: it hires them, pays them, covers their obligations and delivers the finished work to you. What you’re buying isn’t hours or shifts, but a result.
Paying piecework is a compensation scheme for workers who are yours: instead of paying them for the day worked (a day rate), you agree on a price per unit of work completed —square foot of plaster, thousand bricks, assembled piece— and you pay them according to how much they produced. The person is still part of your crew, you still direct them, and you’re still their employer; the only thing that changes is that their pay is calculated by output and not by time.
That’s where the difference that matters comes from: subcontracting moves the employment relationship outside your company, piecework keeps it inside. Confusing them is costly, because calling "subcontracting" what is really your own people paid piecework doesn’t remove any of your responsibility as the employer.
Key differences, side by side
Even though both let you get work done without fattening the fixed payroll, they operate on different planes. Seeing them head to head avoids the most common mistake: believing that paying by output and subcontracting are the same thing.
- Employment relationship: with subcontracting the worker belongs to the subcontractor; with piecework the worker is yours, only how you pay them changes.
- What you buy: with subcontracting, a finished deliverable; with piecework, progress from your own people measured by the unit.
- Who directs: you hold the subcontractor to the result and they organize their people; the pieceworker you direct and supervise yourself, like any of your own workers.
- Employment and safety responsibility: with subcontracting it falls on the subcontractor, with a risk of joint liability for the hiring party if they fail to comply; with piecework it falls entirely on you.
- How it’s paid: subcontracting, through progress payments or contract milestones, usually with a down payment and retainage; piecework, within payroll, as quantity completed × the agreed unit price.
- Quality control: subcontracting, through measurement and acceptance of the deliverable before releasing payment; piecework, through direct supervision on the front so speed doesn’t damage the finish.
- Formality: subcontracting requires a written contract with scope, prices and conditions; piecework requires, at a minimum, a clear agreement on the price per unit and the measurement criteria.
Employment risk: where each one stands
This is the heaviest difference, and where most people get it wrong. With piecework you’re the employer: even though you pay by output, you’re still bound by everything that comes with any employment relationship —payroll taxes and contributions, workers’ compensation coverage, safe working conditions and legally required benefits. Piecework changes the pay formula, not your status as employer. Presenting workers you actually direct as "independent pieceworkers" is a misclassification that usually turns out expensive.
With subcontracting, the employment responsibility for those workers is, in principle, the subcontractor’s, since they’re the one who hires and pays them. But "in principle" isn’t "always": labor and employment law in many jurisdictions provides that the hiring party can end up jointly liable to the subcontractor’s workers when the subcontractor fails to meet its obligations. That’s why subcontracting isn’t sign-and-forget: it’s worth verifying that the subcontractor has its people properly covered and keeping evidence of it.
One point that isn’t optional: in many places, subcontracting labor to perform your company’s own core, habitual activity is restricted or heavily scrutinized, and permitted subcontracting tends to center on specialized services or works that must meet registration or licensing requirements. The regulatory detail varies by jurisdiction and is worth reviewing with your accountant or attorney, but keep it in mind: not all work can be freely subcontracted, whereas paying piecework to your own people carries no such limitation.
How each is paid and how quality is controlled
The payment mechanisms don’t look alike. Subcontracting is paid like a construction contract: there’s usually a down payment so the subcontractor can get started, payments through progress billings or milestones based on measured progress, retainage that’s released at closeout and, where it applies, recovery of the down payment across the progress payments. All of that lives in the contract and is invoiced between companies. Piecework, by contrast, is paid within your crew’s payroll, alongside what’s paid by the day rate: the completed and accepted quantity is measured, multiplied by the agreed unit price, and that amount goes into the week’s pay.
Quality is protected differently depending on whose people they are. With a subcontractor your lever is the contract and acceptance of the deliverable: you set specifications, measure what’s completed and don’t release payment until it complies; retainage is your insurance that they’ll come back to fix whatever turns out wrong after getting paid. With piecework the lever is direct supervision, because the people are yours and work on your front: the typical risk is that the rush to produce more units hurts the finish, so you measure and accept the work before paying for it, with the advantage of being able to step in on the spot.
In both cases the rule is the same: you don’t pay for what wasn’t measured and accepted. What changes is the tool —clause and retainage for the outside party, presence and correction for your own— and who bears the rework: the subcontractor takes it on by contract; piecework you pay for yourself if you didn’t catch it in time.
- Subcontracting: a written contract with scope, prices (unit or lump-sum), a down payment, retainage and acceptance conditions; paid through progress billings against measured progress.
- Subcontracting: ask for and file evidence that its personnel are properly covered; release payments against accepted deliverables, not against promises.
- Piecework: agree in writing on the price per unit and the measurement criteria before starting, so there’s no argument at pay time about how much got done.
- In both: never pay for progress without measuring and accepting it, and keep a record of the measurement so it can be reviewed later.
When each one pays off
Subcontracting pays off when the work requires a specialty you don’t have in house, when the volume is so large that buying a closed result works out better than managing more people, or when you want to pass a risk —schedule, output rate, personnel— to someone who handles it better. Special installations, deep foundations, glazing and curtain wall, waterproofing or a whole work front under time pressure are typical cases: you pay for someone else to solve it and answer for it.
Piecework pays off when the task is repetitive, is measured in a clear unit and you want your own crew to push the pace without you watching every shift: plastering, floor tile setting, rebar assembly, wall building. There, paying by output aligns the worker’s interest with yours —produce more, earn more— and gives you a cost per unit that’s more predictable than the day rate, without losing direct control because the people are still yours.
Put simply: subcontract what isn’t your strength, what you’re better off getting off your plate with its responsibility included, or what demands the registration and structure of another company; pay piecework for the repetitive, measurable work you do know how to do with your people and want to speed up without raising the daily cost. And it’s not either-or: you can subcontract one scope and, within your crew, pay piecework for another.
Common mistakes when choosing
Most problems don’t come from choosing wrong between subcontracting and piecework, but from treating them as if they were the same or leaving them poorly tied down. These are the missteps that come up most.
- Calling your own people paid by output a "subcontract": if you direct them and they’re your crew, it’s piecework and you’re still the employer, with all the obligations that implies.
- Subcontracting without a written contract: without a clear scope, prices and acceptance criteria, any measurement or retainage turns into a fight and you lose your main quality lever.
- Not verifying that the subcontractor has its personnel properly covered: if they fail to comply, the joint-liability risk can end up on your desk.
- Setting a piecework price without knowing the real output rate: a guessed price costs you money or demotivates the crew, and renegotiating it mid-job is always tense.
- Paying for progress without measuring or accepting it: in subcontracting or piecework, releasing money against a promise instead of against measured work is the fastest route to a discrepancy.
- Forgetting that some work can’t be freely subcontracted: pushing your company’s own core, habitual activity out through a subcontract can land you in a problem that piecework with your own people doesn’t have.
How Matterial handles it
Matterial doesn’t choose for you between subcontracting and paying piecework —that decision is yours and depends on the job— but it does keep the choice from turning into a discrepancy. Piecework runs within the crew’s payroll: you enter the completed and accepted quantity of progress, it’s multiplied by the agreed unit price, and that amount goes into the week’s pay alongside what’s paid by the day rate, charged to the right work front of the project, with no re-entry.
Subcontracted work is tracked for what it is —a contract with its own progress— and isn’t mixed in with your people’s payroll, so the project cost reflects on one side what you pay to outside parties and on the other what you pay your crew. That’s what lets you compare, line item by line item, whether subcontracting or doing it piecework with your team worked out better, which in the end is the only honest way to sharpen the decision: with the real cost of each job in view, not out of habit.