Hey there! If you’re a subcontractor wondering how your pay stacks up or a general contractor trying to make sure you compensate your subs fairly, you’ve come to the right place. Determining pay rates for subcontractors can be tricky with all the factors involved, but this guide will break it down in simple terms.
Whether you’re new to the construction world or a seasoned pro, the costs of running a business seem to keep rising. You want to make sure you and your family are covered, right? At the same time, you don’t want to price yourself out of competitiveness. It’s a real balancing act. The goal here is to give you the insider knowledge you need to feel confident negotiating a fair deal as a sub or general contractor. Let’s dive in!
What Determines How Much Subcontractors Get Paid?
When a general contractor is deciding how much to pay a subcontractor, they have to think about a lot more than just hourly wages. The total compensation subcontractors take home reflects a wide variety of costs. Here are some of the key factors:
Labor Costs
The biggest chunk of a subcontractor’s pay is going to be base compensation for time worked. As a sub, you’ll estimate the total hours needed to complete the job, including any potential overtime. Be sure to factor in hourly rates for different types of workers. Apprentices or assistants often earn less per hour than experienced tradespeople or project managers.
Materials Costs
You’ll need to factor in current market rates for all necessary materials like lumber, concrete, wiring, pipes, and more. If the job requires special or rare materials, make sure you account for additional expenses. Discuss contingency funds with the general contractor to cover unexpected material costs too.
Equipment Expenses
Some equipment like basic tools or a work truck may be standard operating costs for your business. But if the job requires renting or purchasing special machinery like excavators or lifts, you need to factor in those equipment expenses.
Overhead Costs
This covers operating expenses not directly tied to a specific project, like insurance, rent, admin costs, and utilities to keep your business running. Make sure to calculate your overhead costs accurately rather than just guessing a percentage.
Profit Margins
Don’t forget, you’re running a business here! Build in a profit margin percentage to the total job estimate—typically between 3-5%. This covers future investments, slow periods, and overall growth for your company.
Regional Factors
If you’re operating in an area with higher costs of living or stricter regulations, wages tend to be higher. Know your local market rates. A subcontractor in California generally earns more than one in Kansas for the same work.
Typical Subcontractor Pay Ranges
Okay, let’s get into some actual earnings numbers! According to recent data, the average hourly wage for subcontractors in the United States is around $22. Of course, rates vary widely based on factors like experience level and project type. The typical total yearly income range for most subcontractors lands between $45,000-$60,000.
Looking at percentile breakdowns:
- 25th percentile = $15-$18 per hour
- 50th percentile = $21-$24 per hour
- 75th percentile = $23-$28 per hour
So 25% of subcontractors earn below $18 per hour, while the top 25% earn over $28 per hour. Half fall within $21-$24 per hour. Overtime, bonuses, and profit sharing can push total compensation higher.
The highest paying cities for subcontractor wages include:
- Santa Clara, CA – $27/hour, $56k/year
- San Francisco, CA – $26/hour, $54k/year
- Fremont, CA – $25/hour, $52k/year
Coastal cities in California generally have the highest rates due to the booming tech industry and high cost of living. But even within the state, incomes can vary widely.
Pay Rates for Specialized Subcontractors
Now let’s look at average incomes for subcontractors working in key trades:
Electrical
On average, licensed electricians subcontracting on construction projects earn around $48 per hour or $100,000 per year. Those with advanced certifications or who manage large projects can earn significantly more.
Construction/Carpentry
From concrete subcontractors to carpenters, these builders average approximately $47 per hour or $98,000 per year. Rates fluctuate based on carpentry skills and crew management experience.
IT/AV
For technology focused subcontractors handling duties like smart building systems, $35 per hour or $74,000 annually serves as a decent benchmark. Expertise with cutting-edge tech can drive salaries higher.
Accounting
CPAs or accounting pros help general contractors with financial management, typically earning around $31 per hour or $65,000 per year. High-level certified accountants may make up to $150,000 annually.
Maintenance/Landscaping
Trades like HVAC technicians, plumbers, and landscapers generally earn $29 per hour or $62,000 per year as subcontractors. Industry certifications provide leverage when negotiating pay.
Other Elements That Can Boost Subcontractor Earnings
Base hourly rates or salaries only tell part of the story when it comes to total subcontractor compensation. Here are some other ways subs can increase their earnings:
Overtime Pay
Construction often requires 50+ hour weeks. Make sure you discuss overtime rates with the general contractor upfront. Time and a half is pretty standard for any hours worked over 40 per week.
Benefits
Many subcontractors are self-employed, so benefits like health insurance and retirement savings accounts aren’t guaranteed. Negotiate contributions for medical, dental, disability insurance, etc. if possible.
Bonuses
For larger, longer-term projects, subs can negotiate performance bonuses for meeting key milestones or finishing under budget/ahead of schedule. Retention bonuses upon project completion are also common.
Reimbursements
If you’ll incur travel, lodging, or meal expenses as part of the job, make sure to clarify reimbursement rates for those costs.
Paid Time Off
Sick days, personal leave, and vacation aren’t legally required for subcontractors. But you can still try to build some paid days off into your contract.
What Impacts Negotiating Power and Earning Potential?
As you navigate the process of determining fair pay as a subcontractor or general contractor hiring subs, keep the following key factors in mind:
Experience Level
Subs with longer histories in their trade have greater credibility to demand higher compensation. Specific experience with specialized aspects of a job also helps.
Reputation
A respected sub with numerous referrals and proven results can justify higher pay. Reference past successes to support negotiations.
Skills & Certifications
Special training and advanced certifications allow subcontractors to take on higher-value tasks. Seek certs that set you apart when discussing wages.
Relationships
Subcontractors with strong professional networks and repeat contractor relationships have more leverage in pay discussions.
Negotiation Approach
Learn tactics like building rapport, discovering motivations, and finding common ground to master pay rate negotiations.
Market Conditions
When contractor demand exceeds subcontractor supply locally, subs can better negotiate higher compensation.
To Wrap It All Up…
Determining fair pay for subcontractors is a complex dance with many variables. As you saw, rates fluctuate based on location, project type, skills, and more. But arming yourself with objective data, building relationships, and negotiating mindfully can help both subs and general contractors agree on equitable deals.
Patience, empathy, and clear communication—not just crunching numbers—are key to making sure both sides feel good about compensation. Approach negotiations as collaborators, not adversaries. When subs and general contractors operate in respect and transparency, it leads to better outcomes for everyone involved.
Hopefully this overview gave you some useful benchmarks and strategies to feel confident navigating your next subcontractor pay discussion. Best of luck sealing a deal that works for all!