Should I pay subs or hire employees?
Short answer
Subs give you flexibility and lower fixed cost, employees give you control and consistency. Most GCs need a mix, not an either-or.
What each one actually buys you
A sub is a business you're renting for the length of a job, you pay per job, they carry their own insurance and tools, and you have less control over their schedule and crew. An employee costs you year-round whether you have work or not, but you control their time, their training, and their quality on your terms.
The trade-off is fixed cost versus flexibility. Employees make sense for the trades that are on every job you run (framing, general labor). Subs make sense for specialty trades you need occasionally (electrical, HVAC, tile) where carrying that skill in-house year-round doesn't pencil.
The line most owners get wrong
How you classify a worker isn't just a business preference, it's a legal test based on control, tools, and how much of their income comes from you versus other clients. Misclassifying an employee as a sub to dodge payroll tax is one of the most common ways owners get an expensive audit.
Check your state's rules on worker classification before you decide. If someone works only for you, uses your tools, and takes direction on how (not just what) to do the work, they likely need to be an employee regardless of what you call them on paper.
Rough cost comparison, framing crew
| Sub crew, per job costNo payroll tax, no idle time cost, less schedule control | $18/sqft all-in |
|---|---|
| Employee crew, fully loadedIncludes payroll tax, workers comp, gaps between jobs | $28-32/hr per person |
| Break-even utilizationEmployees pencil out once you can keep them busy 3 of 4 weeks | ~75% booked |
The math: Employee cost only beats sub cost once your work volume keeps that trade busy most of the year. Below that, subs are usually cheaper on paper and safer on cash flow.
Where owners get this wrong
- Calling someone a sub because it's cheaper, when the actual working relationship looks like an employee.
- Hiring a trade in-house before you have steady year-round volume for it.
- Never revisiting the sub-vs-employee decision as the business grows.
Worth knowing: Worker classification rules (employee vs. independent contractor) are set by your state and the IRS and carry real penalties if you get them wrong. Check your state's labor department guidance or talk to an accountant before deciding, don't decide based on what's cheaper alone.
Ask your version of this question
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Now run it against your numbers.
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