Paying a subcontractor looks simple. The job is done, you owe them money, you pay. In practice it goes wrong in three predictable places: the amount was agreed loosely ("the usual"), the due date was never set, and nobody kept a running list of what is owed. The sub finds out they were short six weeks later, and the relationship ends over a number neither side can prove.
This guide covers the three decisions that prevent that: how the amount is set, when it is due, and how you track it. It does not cover whether someone should be a subcontractor at all. That is a classification question with real legal weight, covered briefly at the end and in the 1099 subcontractor definition.
Decision 1: Percent of list or a flat amount
There are two common ways to set sub pay on service and install work.
Flat amount per job. "$180 for a standard tune-up." "$1,400 per install day." It is easy to quote, easy to check and easy to budget. It works best when jobs are similar in size: maintenance routes, standard installs, inspections.
Percent of a list price. "60% of our list price for the job." The sub's pay rises and falls with the ticket. It works best when job sizes vary a lot, such as repairs where the ticket depends on what the tech finds.
The catch with percent is the word "list." Percent of whose price list, and of which line? Percent of the full ticket, including equipment you supplied, is a very different number from percent of the labor line. Write down the base every time.
You can find the ticket size where the two methods pay the same:
Break-even ticket = Flat amount ÷ Percent
If most of your tickets sit below the break-even, percent is cheaper for you and worse for the sub, and good subs will notice. If your tickets swing widely, percent shares the risk of a small job, which is often fairer than a flat rate both sides argue about.
Whichever you pick, run your own margin on it. The sub's pay is a cost of the job just like parts. The subcontract vs hire guide shows how to compare that cost with a W-2 tech's loaded cost across a season.
Decision 2: How many days until it is due
Payment terms say when money is due, counted from a starting event. For sub work, the cleanest starting event is the day the job is done. Not the day you invoice your customer, and not the day your customer pays you, unless both sides agreed to that in writing.
Common terms are due on completion (net 0), net 7, net 15 and net 30. Longer terms help your cash. They cost the sub, who is carrying the money:
Money the sub carries = Weekly pay to that sub × (Net days ÷ 7)
A one-person company carrying $8,600 for you is effectively lending you that money. Some will price it into their rate. Some will take your work only when nobody else calls. If a sub matters to your capacity in peak season, short terms are often the cheapest way to stay first on their list. Scheduling subcontractors gets easier when they want your work.
Your contracts, and in some places state law, may set their own payment deadlines for subcontract work. Those rules vary by state and contract type, so check with your attorney for the work you do.
Decision 3: Keep a ledger, not a memory
Once you send more than a handful of jobs a month, nobody can remember what is owed. Write it down per job, the day the job is done:
| Field | Why it matters |
|---|---|
| Job and date done | Starts the due-day clock |
| Partner | Who is owed |
| Terms | Percent (and base) or flat, plus net days |
| Amount owed | Computed from the terms, not typed in later |
| Due date | Date done plus net days |
| Status | Owed, paid (with date and method), disputed |
Review it weekly. Anything past due gets paid or gets a phone call that day. Anything disputed gets resolved against the terms, which is why the terms have to be written on the job, not in a text thread.
The ledger also runs the other way. If you take overflow from other companies, they owe you, and the same columns tell you who is late.
This is the part CrewLink handles for work sent through CrewConnect, its contractor network. Both owners agree the exact terms before the job goes out: a percent of the partner's list price or a flat amount, due a set number of days (0 to 90) after the job is done. CrewLink keeps a payouts ledger of what you owe partners and what partners owe you, with due dates. It records payouts; it does not pay them. The companies settle directly by whatever method they use.
Paperwork before the first payment
Collect the basics before you send a dollar:
- Form W-9. As of October 2026, the IRS describes Form W-9 as how a payee provides their correct taxpayer identification number. You need it to file information returns.
- Form 1099-NEC at year end. As of October 2026, the IRS instructions for Form 1099-NEC set the reporting threshold for nonemployee compensation at $2,000 for tax years beginning after 2025. Check the current instructions each year, because thresholds change.
- Certificates of insurance and licenses where your trade or customers require them, with expiry dates you actually track.
On classification: the IRS looks at the right to direct and control the work, not at what the paperwork says. Paying someone on a 1099 while setting their hours and methods can create a problem that no payment schedule fixes. State tests can be stricter. Talk to a CPA or employment attorney; this guide is not legal or tax advice.
What to take away
- Flat pay fits similar-sized jobs; percent of list fits jobs that vary. The break-even ticket is flat ÷ percent.
- Always write down the base for percent pay: whose list, which lines.
- Count due days from the day the job is done. Longer terms are a loan from your sub.
- Keep a per-job ledger with terms, amount, due date and status, and review it weekly.
Common questions
What is the best way to pay subcontractors?
The best method is the one with written terms per job, a due date counted from completion, and a ledger both sides can check. The method of moving money, such as ACH or check, matters less than agreeing the amount and date before the work starts.
Is net 30 normal for subcontractors?
Net 30 is common in commercial and construction work. For small service subs, shorter terms such as net 7 or net 15 are often easier to staff around, because a one-person company carrying a month of pay feels it quickly.
Should I pay subcontractors a percentage or a flat rate?
Use flat rates where jobs are similar in size and percent of list where they vary widely. Compute the break-even ticket (flat amount divided by percent) and check where most of your tickets fall before you decide.
When do I have to send a 1099-NEC to a subcontractor?
As of October 2026, the IRS instructions set a $2,000 threshold for nonemployee compensation for tax years after 2025. There are exceptions, such as for some corporations, so confirm with the current IRS instructions or your CPA.
Can I pay a subcontractor when my customer pays me?
Only if you both agreed to that in writing before the job. It shifts your customer's payment risk onto the sub, so expect good subs to ask for a higher rate or decline.