Subbie or employee for a tradie: what each really costs when the customer pays late

The jobs are stacking up, you’re working weekends, and you need another pair of hands on site by Monday. The first question is usually “do I put someone on, or just ring a subbie?” The second, which gets asked far less often, is “what happens to my bank account if the builder doesn’t pay me for six weeks?”

That second question is where the real difference sits. Here’s how the two options compare, including the bits that don’t show up in the hourly rate.

Is it your choice at all?

Less than most people think. You can offer someone a subbie arrangement, but whether they are one depends on how the work actually runs.

Since 26 August 2024, the Fair Work Act has used a “whole of relationship” test. Per the Fair Work Ombudsman, it looks at all the factors in the relationship, and at how the work is performed in practice, not only what the contract says. In plain terms, these are the things that point towards a genuine subbie:

• They’re running their own business. Own ABN, own insurance, other clients, quoting for jobs rather than being rostered.
• They’re paid for a result. A price for the bathroom, not an hourly wage for turning up.
• They bring their own tools and ute. You’re not handing over the gear.
• They decide how and when. Control over methods and hours is theirs, within the job’s deadlines.
• They can send someone else. A genuine contractor can usually put their own worker on the job.
• They carry the risk. If they get it wrong, they fix it on their time.

And these point the other way: set start and finish times, your logo on the shirt, your tools and ute, no other clients, and being told how to do the work. That’s an employee in a hi-vis, whatever the invoice says.

Get it wrong and it’s not just a paperwork problem. The Fair Work Ombudsman’s sham contracting page explains that treating an employee as a contractor can attract penalties, and you’d owe the person back pay, leave and super on top.

What does a subbie cost, really?

A subbie’s rate looks high because it has to cover a lot. It pays for their ute, tools, insurance, super, leave and the gaps between jobs. In exchange, you pay for the work you’ve asked for and nothing else.

What that gets you:

• No wages when you’re quiet. No work, no cost.
• No leave, no sick pay, no super on a genuine contractor, and no workers compensation premium on your payroll for them.
• Skills you may not have in-house, for the stretch you need them.

What you still carry:

• Reporting. If your business mainly provides building and construction services, the ATO requires a taxable payments annual report (TPAR) listing what you paid contractors, due by 28 August each year. You need each contractor’s name, address, ABN and the amount paid including GST. Paper lodgements stopped after 28 August 2025, so it’s online now. If you have nothing to report, a non-lodgment advice is still due by the same date.
• Super in some cases. Per the ATO, super can be payable to a contractor who is paid wholly or mainly for their labour, even with an ABN. A subbie who supplies materials and works their own way is a different story from one who just supplies hands.
• The squeeze on the invoice. Subbies tend to want paying promptly. If they invoice weekly and your customer pays at 30 days, you’re funding the gap.

What does an employee cost, really?

The hourly wage is the smallest part of it. On top you’ll usually have super (12% from 1 July 2025), workers compensation, paid leave, and the cost of the days nobody’s billing. Since 1 July 2026, super also has to reach the employee’s fund within 7 business days of payday, which makes it a pay-run cost rather than a quarterly one. We’ve covered that in payday super for tradies.

What you get for that:

• Someone who works your way, on your jobs, and who can be trained to your standard.
• Reliable capacity. They turn up on Monday.
• A path to an apprentice or a lead hand later.

The catch is timing. Wages and super go out on pay day. They don’t wait for your customer’s progress payment.

A worked example (illustrative only)

Say you need a second pair of hands on a six-week fit-out. These numbers are made up to show the shape, not to quote.

	Subbie	Employee
Rate	$75 an hour invoiced	$45 an hour wage
Super	Usually nil if genuine contractor	12% = $5.40
Workers comp, leave, downtime	Built into the rate	Add roughly another 15–25% on your side (varies by state and trade)
Cost per 40 hours, before extras	$3,000	$2,016 plus on-costs
When you pay	On invoice, often weekly	Every pay run, locked in
If work stops	You stop paying	You keep paying

On paper the employee looks cheaper. Add on-costs, then ask what happens in week three when the work dries up or the customer’s payment lands late. The subbie’s cost disappears with the work. The employee’s doesn’t.

Now the cash timing. Suppose you bill progress claims fortnightly, and the customer pays 30 days after the claim. Whichever route you pick, labour goes out in week one and the money lands around week six. The peak gap is the labour you’ve paid by then. The cash-flow gap planner will show you that number for your own job in a couple of minutes.

If your numbers show a gap bigger than your buffer, it’s worth knowing your options before the job starts, not after payday. You can check what’s possible here in about a minute, and it doesn’t involve a credit check.

How should you decide?

Run through these in order:

1. Is the work steady for the next six months or more? If yes, an employee often makes sense. If it’s a one-off burst, a subbie fits.
2. Do you need to control how it’s done? If you do, you’re describing an employee.
3. Could they genuinely send someone else, work for others and use their own gear? If not, think twice about the subbie label.
4. What’s your buffer? Can you pay wages and super for six weeks without the customer’s money? If not, get the buffer sorted first.
5. Have you priced the labour properly? Cost labour into the quote at the full on-cost rate. Our guide on how to price a job as a tradie walks through that.

Many crews run both: a core employee or two for steady work and subbies for peaks and specialist trades. That’s perfectly normal, provided each person is genuinely what the arrangement says.

Can you make the late-payer problem smaller?

Yes, and it matters more than the subbie versus employee choice.

• Invoice on the day. Progress claims lodged early get paid earlier. In NSW, for example, payment claim rules set the clock; see our guide on payment claims.
• Line up your terms. Where you can, agree subbie payment terms that follow your own customer’s payment cycle, in writing, before the job.
• Take a deposit for materials and mobilisation. It shrinks the peak gap before it opens.
• Bridge the rest. When the gap is bigger than your buffer, wages finance or subcontractor finance covers pay day while the customer’s money is on its way.

Before you put someone on

Growing the crew should feel like a step forward, not a gamble on the next payment run. The tradies who handle it best usually do the same thing: they work out the labour cost properly, they know what the peak gap will be, and they have the funding lined up before the first invoice goes out.

If you’re weighing up a first hire or a subbie for a big job, let’s see where you stand. Enquiring takes about 60 seconds, and your credit file isn’t touched just for asking. We don’t send your details to a pile of lenders, so your phone won’t light up with strangers. A real person looks at your situation and calls you to talk it through. The only thing we ask is that you fill the form in accurately, so we can point you at the right option first time.

See if you qualify →