The Case for Employee Crews

Joyce Bires, a septuagenarian widow in Omaha, Nebr., doesn’t know a lot about construction. But she knows what she sees, and what she saw was that the new deck addition that cost her $5,000 looked like an accident waiting to happen.

So, she contacted the local TV station WOWT, who in turn reached general contractor John Sewell, owner of Sewell Landscaping, who answered some questions and referred the reporter to the subcontractor he’d hired to build the deck, Caballeros Construction.

When the story broke, Omaha’s Chief of Code Enforcement Jay Davis stepped in, and the finger pointing began. Sewell was unlicensed to build in Omaha but, according to him, Caballeros Construction had a license.

When asked why no one had pulled the required permit, Caballeros said Sewell was supposed to have done that, and Sewell assumed Caballeros would since he had the license. No permit, therefore no pesky inspection, but Davis said the deck wouldn’t have passed anyway, given various problems including the lack of concrete footings under a two-story structure, already starting to pull away.

“I try to do a good job," Sewell told WOWT's reporter. "I’m trying to run an honest business.”

The Subcontractor Advantage

In short-cycle construction jobs, subcontracted installers are more the rule than the exception. A good subcontractor is probably booked out months ahead, providing an incentive to complete the work on time.

You also know exactly what the cost is. Most roofing or siding companies hire subcontractors at a fixed price per square, window companies per opening. An employee crew paid by the hour may take longer, and comes with the added expense of employee benefits—a substantial expense for small companies.

That additional cost has to be built into the price you charge, creating a disadvantage in selling that takes a skilled salesperson to overcome. “Who will the homeowner go with, the company that subcontracts or the company that doesn’t?" asks  Stan’s Roofing & Siding, in Orland Park, Ill., on its website. "All else being equal, the homeowner goes with the lower price and thinks the non-subcontracting company is trying to cheat them."

Seasonality works against employee crews as well. Depending on your market, you need to figure out what to do with payroll employees when it’s too cold for outdoor work. Using subcontractors eliminates this issue, since you hire as needed.

But Is It Enough?

But the fact that many homeowners show concern about subcontractors performing the work may outweigh those advantages. What if the general contractor fails to pay the subs? Can they file a lien against the property? (Under certain circumstances, yes.)

What if something happens to a subcontractor or his employee on the job? Can they sue the homeowner for medical expenses? (Possibly, depending on circumstances.)

What if the job falls apart or, as with Bires, shows evidence that it will? In that case, blame shifting soon ensues.

Who Was It We Hired?

To build their big, six-figure jobs, design/build contractors rely on subcontractors—framers, drywall crews, electricians, plumbers and many others—and explain to homeowners that the subs are accountable to them through solid subcontractor agreements, in most situations. "How else could you pull off a whole house remodel or build a second-story addition?" they say.

For specialty contractors, the job is simpler—putting on a new roof or new siding—and they pour their energy into selling it. That gives specialty companies willing to employ their own crews a competitive edge they are increasingly inclined to leverage.

“While there are probably plenty of excellent subcontractors, allowing someone to complete the work you said you would do takes away some of the control,” notes the website for Westchase Roofing Services, in Tampa, Fla. 

Control’s The Thing

Companies fielding their own crews control all aspects of installation and can stand behind the strength of their warranties. “Having installers as employees and not subcontractors means we can provide our valued customers with an installed roof capable of living up to our exclusive two-part warranty,” notes American Metal Roofs, in Ann Arbor, Mich. “That's something impossible to get from any roofing company that uses contract labor for metal roofing installation.”

Companies using employee installers can also afford to offer extended workmanship warranties. Stan’s Roofing & Siding, for instance, has a 10-year warranty on labor.

In addition, manufacturers will not back product warranties if the product hasn’t been installed to spec and will often offer training and certification programs to ensure that it will be. 

With employee crews, you can also set and enforce standards for interacting with homeowners. You can’t ask a subcontractor to ring the bell and introduce himself before the job starts—he doesn’t work for you.

But your employee is required to follow company protocol, and so would introduce himself at the start of a job, building rapport with the client. “So if there’s an issue,” says Scott Siegal, owner of Maggio Roofing, in Takoma Park, Md., which installs with its own crews, “they’re comfortable talking to you and you to them.”

Properly trained crews lay the groundwork for building repeat/referral business. Maggio Roofing, for instance, started with around 15 percent repeat/referral customers but is now tracking 48 percent.

Subcontractor Agreement

Most specialty contractors of any size built the business with subcontracted labor. It’s a necessary growth stage that can easily morph into the business model. That’s fine, but how do you make sure subcontractors represent no potential risk to your company or your homeowner client?

First, use inspections to ensure the work meets your company’s standards, or at least the installation specs of the manufacturer. Also beneficial is creating a subcontractor agreement that requires subs to carry proper insurances, outlines the scope of work, sets deadlines, and specifies who’s responsible if there’s a problem with the job.

Had that been in place, Sewell and Caballeros Contracting wouldn’t be blaming each other: The need for footings would’ve been stated in the agreement as part of the scope. In the meantime, although both the general and subcontractor offered to “make the deck right,” Bires simply wants a refund.