How Should a Remodeler Hire and Manage Subs?

By Wyatt Cooper · Published October 22, 2026 · 7 min read

Key takeaways

Hire subs who hold the license their trade needs and carry their own liability and workers' compensation insurance; in California an unlicensed worker in a licensed trade is presumed to be your employee.
Before the first day, collect a W-9, a certificate of insurance and the license number, and sign a written scope with a price, a schedule and a change process.
Manage subs by the schedule and the inspections: confirm each start a week out, walk the work before it is covered, and keep a punch list per trade.
Pay against invoices for work done and a lien waiver for each payment, and file a Form 1099-NEC for payments of $2,000 or more in 2026 to subs that aren't corporations.

A remodeler should hire subcontractors who are licensed for their trade and carry their own insurance, collect a W-9, a certificate of insurance and the license number before work starts, and sign a written agreement with the scope, price, schedule, change process and payment terms. Then manage them by the schedule and inspections, pay only for work done against a lien waiver, and report payments on Form 1099-NEC where the IRS requires it.

Sub or employee: settle it first

The IRS decides whether a worker is an employee or an independent contractor by "the degree of control and independence," in three groups of facts: behavioral (do you control how the work is done), financial (how they are paid, who supplies tools) and the type of relationship (written contracts, benefits, permanence) (IRS, Independent contractor or employee). A trade business with its own crew, tools, insurance and other customers, paid by the job, reads as a sub. A person you direct day to day, paid by the hour with your tools, reads as an employee.

States can be stricter. In California there is "a rebuttable presumption" that a worker performing services that need a contractor's license "is an employee rather than an independent contractor," and anyone doing licensed work "shall hold a valid contractors' license as a condition of having independent contractor status" (Cal. Labor Code § 2750.5). An unlicensed "sub" there is legally your employee, with payroll and workers' compensation to match. California's general building license also limits what you may do alone: a B contractor may take a prime contract for other trades only with two unrelated trades besides framing, or by holding the specialty license, or by subcontracting to "an appropriately licensed contractor" (Bus. & Prof. Code § 7057).

What to collect before the first day

A remodeler's sub file: what to collect, why, and when
Document	Why	When
License number, checked with the state board	The trade's license, active, in the right classification	Before you sign
Certificate of insurance	Liability coverage in force, your company named where your contract requires it	Before the first day; again at each renewal
Workers' compensation proof or exemption	Who pays if their worker is hurt on your job	Before the first day
Form W-9	Their legal name and taxpayer ID, for the Form 1099-NEC	Before the first payment
Signed subcontract or work order	Scope, price, schedule, changes, payment, cleanup, warranty	Before the first day
Lien waiver	Release for each payment you make	With each payment

Commercial GCs collect a longer list of the same papers; see what paperwork a GC requires from a sub. For a home job, the six above are the minimum.

Write the scope, even for a small job

A sub's quote is their scope, written to protect them. Write your own, line by line, with what's included and excluded, and have the sub sign it with the price. The method is the same as on a commercial job: see how to write a scope of work for a subcontractor.

Work order — tile, Lin hall bath

Sub: Fictional Tile Co., license on file, COI and W-9 received
Scope: Set floor (40 sq ft) and shower walls (70 sq ft) per layout over our waterproofed backer; grout and seal
Excluded: Tile and setting material (supplied by us); backer and waterproofing (ours); glass door
Price: $3,600, fixed
Schedule: Start the day after the waterproofing passes inspection; 4 working days
Changes: Only by written change order, priced before the work
Payment: Net 10 days after the work is complete and accepted, against a conditional lien waiver
Cleanup and warranty: Daily cleanup; one-year workmanship warranty to match ours to the client

A fictional tile sub's work order on a remodel, filled in

In California, the client's home improvement contract must also say whether subcontractors will be used, with a Yes/No box, and if so that "a list of subcontractors is required to be provided, upon request," with their names, contact information, license number and classification (§ 7159(c)(7)). Keep the list current.

Manage them by schedule and inspection

Book each sub off the work before them and the inspection that releases it, and confirm the start a week out and again the day before. See how to schedule trades on a home build.
Have one person on your side give the sub direction, so the client's requests become change orders, not side deals.
Walk the work before it is covered, with the sub, and write a punch list per trade the same day.
Keep notes and photos of each visit; they settle disputes over what was done and when.

Pay against waivers, then report

Pay for work done, against an invoice and a lien waiver for that payment: a conditional waiver with the check, then an unconditional one once it clears. See how to fill out a conditional lien waiver.

At year end, the IRS requires Form 1099-NEC "for each person in the course of your business during the year to whom you have paid at least $2,000" for services by a non-employee, including parts and materials (IRS, Instructions for Forms 1099-MISC and 1099-NEC). The threshold rose to $2,000 "for tax years beginning after 2025" and may be adjusted for inflation from 2027; payments to a corporation, including an LLC taxed as one, generally aren't reported. The W-9 you collected tells you which applies.

The bottom line

Hire licensed, insured subs; collect the license, COI, workers' comp proof and W-9 before the first day; sign a written scope with a price and a change process; manage by schedule and inspection; and pay only for work done, against a waiver, with a 1099-NEC where the IRS requires one.

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Sources

Independent contractor (self-employed) or employee? — Internal Revenue Service. Read October 22, 2026.
Instructions for Forms 1099-MISC and 1099-NEC (12/2026) — Internal Revenue Service. Read October 22, 2026.
California Labor Code § 2750.5 — California Legislative Information. Read October 22, 2026.
California Business and Professions Code § 7057 — California Legislative Information. Read October 22, 2026.
California Business and Professions Code § 7159 — California Legislative Information. Read October 22, 2026.

Questions

How do remodelers find good subcontractors?

Ask the trades, suppliers and inspectors you already work with, then try a sub on a small job first. Check the license and insurance before you sign, and keep the subs who show up when they say, pass inspections and clean up.

Do my subcontractors need their own insurance?

Yes: their own liability insurance, and workers' compensation if they have employees. Collect a certificate of insurance before the first day and again when it renews; otherwise their worker's injury on your job can become your claim.

Is a subcontractor an employee?

Not if they are truly independent: their own business, tools and insurance, paid by the job, controlling how the work is done. The IRS weighs behavioral, financial and relationship facts, and some states are stricter; in California an unlicensed worker doing licensed work is presumed an employee.

Do I need to send subcontractors a 1099?

For payments made in 2026, file Form 1099-NEC for each non-employee you paid at least $2,000 for services in the course of your business. Payments to most corporations aren't reported. Collect a W-9 before the first payment so you know.

Should I pay subs a deposit?

Rarely for labor; pay for work done. If a sub must buy special-order material, pay for the material against a supplier invoice, and get a lien waiver with each payment.