Guides
Deck subcontractor agreement vs employee: which fits your crew?
Deck subcontractor agreement vs employee decides your labor cost and legal exposure. Here is how the IRS and three big states treat the same crew.
What to take away
- A W-2 deck hand costs 7.65% in FICA plus FUTA and state unemployment tax. A true 1099 subcontractor costs none of that.
- California, Massachusetts and New Jersey use the ABC test, so a crew building your core product is almost always an employee there.
- Texas and Florida weigh common-law control factors, which leaves more room for 1099 arrangements.
- Misclassification reaches back years, and California charges civil penalties of $5,000 to $25,000 per violation.
Start with the money
The cost gap is why most owners ask. This is what each route puts on your books.
W-2 employee
- FICA
- You pay 7.65% of wages
- FUTA
- 6.0% on the first $7,000 of wages, 0.6% after the state credit
- State unemployment tax
- New-employer rates typically fall between 0.3% and 3.5% of wages
- Workers compensation
- Carpentry class rates commonly land between $2 and $8 per $100 of payroll
- Overtime
- Time and a half after 40 hours
- Tools, trailer, fuel
- Yours
- Payroll admin
- Payroll service, quarterly returns, year-end forms
1099 subcontractor
- FICA
- None
- FUTA
- None
- State unemployment tax
- None
- Workers compensation
- Certificate from the sub
- Overtime
- Not owed by you
- Tools, trailer, fuel
- The sub's
- Payroll admin
- One invoice per phase
FICA, FUTA and overtime are statutory. The state unemployment and workers comp rows are typical ranges, because carriers set rates by class code and loss history. Get your own figures from your carrier and your state fund.
W-2 vs 1099 criteria
W-2 employee
- Payroll tax
- You pay both halves
- Unemployment insurance
- You pay on wages
- Workers compensation
- Usually required
- Control
- You direct work
- Tools
- You supply
- Overtime
- Owed after 40 hours
1099 subcontractor
- Payroll tax
- Worker handles own
- Unemployment insurance
- Generally not owed
- Workers compensation
- Worker may carry own
- Control
- Worker sets schedule
- Tools
- Worker supplies
- Overtime
- Not owed
If you hire W-2, plan the first week around onboarding. Our guide to training new deck and patio staff covers what to hand over before a new hire runs a saw.
The control test that decides it
Two questions carry most of the weight: who controls the work, and who carries the financial risk. A third looks at the relationship itself, including whether the arrangement has an end date. The IRS criteria for independent contractors and employees sets out all three.
Ask who sets the start time and who chooses the fasteners. Ask whether the worker can take another builder's job. The legal distinction between an independent contractor and an employee rests on that independence, not on the invoice.
W-2 or 1099?
Do you need daily direction and control?
W-2 employee
1099 subcontractor
Where the state line falls, and the bill for getting it wrong
California applies the ABC test. A worker is an employee unless the hiring firm proves freedom from control, work outside its usual course of business, and an independently established trade. Deck and patio work is your usual course, so prong B sinks most California crews.
Massachusetts and New Jersey use the ABC test too. Texas and Florida rely on common-law control factors, closer to the IRS approach.
Penalties follow the same split. California Labor Code 226.8 sets civil penalties of $5,000 to $15,000 for each willful misclassification, rising to $10,000 to $25,000 where a pattern or practice exists.
Federal exposure is separate and includes back employment tax and unpaid overtime. Where the employer did not intentionally disregard the rules, IRC 3509 allows a reduced assessment of 1.5% of wages for withholding plus 20% of the employee FICA share.
The safety duty that does not transfer
OSHA duties sit with the employer of the people on the deck, and no subcontract moves them. Employers must train workers exposed to fall hazards and document it, as OSHA 1926.503 requires.
A 1099 railing crew still needs guardrails or personal fall arrest above six feet, plus a competent person who can spot the gap. Our summary of OSHA deck construction safety requirements covers the protections residential crews miss most.
What a subcontractor agreement must contain
- Scopethe phase, the square footage, materials by name, and who supplies them.
- Pricedraw schedule, invoice terms and holdback.
- Insuranceliability limits, a workers comp certificate, and additional insured wording.
- Indemnitythe sub covers their own acts and their crew's.
- Permitswho pulls the permit and who meets the inspector.
- Safetyfall protection duty, competent person, documented training.
- Terminationnotice period, cure rights and who keeps unused material.
A written agreement helps, but it does not set the status on its own.
The Canadian side of the same fork
Canada runs the same fork under CRA rules, which test control, tool ownership and chance of profit. Source deductions for CPP and EI follow an employee finding, and contractor invoices carry GST/HST. If you build on both sides of the border, how deck contractors charge GST HST covers registration and place-of-supply rules.
Example
A three-person crew frames and finishes decks five days a week for one builder. They use the builder's trailer and nail guns, take no other work, and get a 1099 each January. Under the IRS test, that is employment.
If an audit lands, the builder owes back payroll tax, state unemployment contributions, unpaid overtime and workers comp premiums for the open years. The fix is payroll, or different facts: the crew bids whole phases, carries its own tools, and takes other jobs.
Keep the paper trail in order either way. A signed agreement, a current certificate of insurance and invoices that name finished phases all help.
One worker or six, the same test applies. A helper a 1099 framing sub brings along may be your employee, not the sub's, if you direct that helper's day.
When a sub's scope grows mid-season, a deck and patio change order form prices the extra work before anyone orders material.
