Subcontractor meaning in construction
A subcontractor is a trade business engaged by the builder to do part of a residential build. Subs sit last in the payment chain and are paid for completed, approved work.
Definition
A subcontractor is a trade business engaged by the builder to carry out part of a residential build. Plumbers, electricians, carpenters, plasterers, tilers, and bricklayers are all subcontractors. The builder holds the head contract with the owner. The sub holds a smaller contract with the builder, not with the owner.
Subcontractors do the hands-on work. They are not the same as suppliers, who sell materials rather than perform labour on site. A sub buys their own materials, brings their own tools, and invoices the builder for the work once it is done.
Why it matters
Subs carry the cash risk. You buy materials, you pay your crew, then you wait to get paid. In the current system you are last in line, so when money runs short upstream, your invoice is the one that stalls. Knowing where you sit in the chain, and when the clock starts, is the difference between planning your cash flow and chasing it.
How it works in practice
The builder wins the job and signs the head contract with the owner. The builder then engages subs for each trade. You quote, you get the nod, you do the work, you invoice the builder. The owner never pays you directly.
Payment flows top down. The owner pays the builder at each stage. The builder then pays the subs out of that money. Under the current system those funds land in the builder operating account and mix with everything else the business owes, so your invoice competes with every other bill the builder is juggling.
Your payable is capped at your contract value plus any approved variations. Work above the cap is withheld in the account, not paid, until a variation is approved. Materials the builder pays on your behalf are set off against what you are owed. A retention-style amount is held back and released after completion once open defects are resolved.
On BuildFair, owner money sits in regulated custody with BuildFair banking partner Kobble (Kobble operates under AFSL 545391, Yondr Money Pty Ltd), separate from the builder operating account. Subcontractor payments release on a fixed 7-day clock from invoice approval. The ledger records your payment the moment the invoice is approved, and only the bank send waits out the 7 calendar days, so you know the date instead of guessing it.
Common misconceptions
Subcontractor and supplier mean the same thing
They do not. A subcontractor performs labour on site. A supplier sells materials and does not do the work. The two sit in different parts of the chain and get paid on different terms.
The owner pays the subbies
No. The owner pays the builder, and the builder pays you. You hold a contract with the builder, not the owner, so if the builder stalls, the money stalls with them.
Approved variations unlock extra money on top of the contract
An approved variation raises your cap to contract value plus that variation. It does not create headroom beyond the agreed scope. Work past the cap is held in the account until a variation is approved by both builder and owner.
The 7-day clock means BuildFair is slow to pay
It is a fixed, known date, not a delay nobody can see. The ledger posts your payment the instant the invoice is approved. Only the bank send waits the 7 calendar days, so you can plan around it instead of guessing.
This is general information, not legal or financial advice. For payment disputes, talk to a lawyer, your state tribunal, or Legal Aid.