A topic that comes up quite frequently is the difference between trades that use employees, contractors (subcontractors), and payroll workers. There are many misconceptions and nuances surrounding this subject that deserve a closer look.
To begin, it is important to clarify some terminology that is often confusing or misunderstood—specifically the distinctions between contractors and contract workers, and between employees and payroll workers.
Contractors vs. Contract Workers
When people refer to contractors or subcontractors, they are often thinking of independent trade workers. These terms are frequently used interchangeably, but they can easily be confused with workers who are simply paid on a contract basis.
While some may argue these are essentially the same, the differences often come down to people’s experiences versus the technical definitions of the terms. For example, many people say they have been “burned” by contractors. The customer is usually referring to a trades company without necessarily knowing if the workers work employees or sub-contractors. Either way, their experience reflects a poorly managed company that did not provide a satisfactory level of quality and customer service.
At the same time, there are many highly reputable companies that work with long-term, loyal workers and pay them on a contract basis. Unfortunately, the term contractor sometimes carries negative connotations. However, when managed properly, subcontracting can actually be a strong and positive attribute for both a company and its customers.
That being said, there are certainly companies that rely on low quality and untested labour simply to fulfill a contract, which can lead to inconsistent results.
Employees vs. Payroll Workers
Another commonly misunderstood distinction is between employees and payroll workers.
It is not uncommon to hear companies claim that all of their workers are “on payroll” when asked whether they use only employees. However, they often avoid using the word employee directly. The reason is fairly straightforward: companies know that customers value the idea of employee-only companies.
Instead of being technically untruthful, they use the term payroll workers, which can give the impression that workers are employees. In reality, anyone being paid during the duration of a project—whether they are employees or temporary workers—is processed through payroll. Payroll is an accounting term, not an employment classification.
Employee-Only Companies vs. Subcontractor Models
With these terms clarified, it becomes easier to discuss the differences between companies that use only employees and those that work with subcontractors.
To be transparent, almost all painting contractors use subcontractors to some degree. Based on decades of experience in the industry, working for and alongside many companies, this is simply the reality. Some companies attempt to mask this with confusing or occasionally misleading terminology, but the fact remains that most rely on subcontractors in one form or another.
Does this matter? The answer is both yes and no.
If a company fails to properly screen, train, or monitor its subcontractors, problems on the job site are far more likely. In some cases, subcontractors may work for multiple prime contractors at once, moving between projects and potentially stretching themselves too thin, which can slow project timelines.
On the other hand, some companies work exclusively with highly skilled, loyal subcontractors whom they train, invest in, and closely supervise. These companies can deliver excellent workmanship, strong service, and great value for their customers.
Conversely, employee-only companies can benefit from strong culture, consistent processes, and stable teams. However, they may also face challenges with training, screening and managing their workforce. Underperforming employees can sometimes be difficult to replace, and over time some organizations may experience stagnation or productivity plateaus. In certain situations, bringing in high-quality outside talent can be beneficial when existing teams cannot meet specific demands.
Cost, Quality, and Mentality
From our experience in the industry, many larger companies have experimented with the employee-only model. While some attempt to maintain this structure, they often encounter several challenges that make it difficult to sustain long term.
The first challenge is cost. Managing a large employee workforce requires significantly more administrative support in areas such as human resources and payroll. These added expenses are typically passed along to customers, making it harder for the company to remain price-competitive.
The second issue is quality and incentive. Workers who operate with a strict paycheque mentality may have little motivation to improve efficiency or go above and beyond. Whether they work quickly or slowly, or produce average or excellent results, their compensation often remains the same. This can sometimes lead to lower productivity and less exceptional customer service.
The third factor is mentality. When workers are rewarded for stronger performance and greater efficiency, they often become more motivated and invested in the outcome of their work.
Final Thoughts
In general, we do not believe one structure has an advantage over another. It really comes down to the people working for the company
Ultimately, how a worker receives their paycheck does not guarantee the quality of their workmanship or the level of customer service they provide. In both models—employees or subcontractors—it is the responsibility of the company to properly screen, train, and manage the people representing them.
Customers should also be cautious when companies present payroll workers as a competitive advantage. As mentioned earlier, payroll is simply an accounting term and does not indicate employment status.
Another phrase that is sometimes used in marketing is “owners on site.” In some cases, companies provide foremen with a non-voting, low-class share in the business so they can be described as “owners,” even though they are effectively subcontracted supervisors.
In the end, choosing a company should be based on more meaningful factors such as reputation, references, quality of work, customer service, company culture, loyalty, and the level of investment a company makes in its people.
