Build the crew out of companies, and Texas lets you take the job you are too small for

A general contractor calls on a Tuesday about a package that needs eleven men on site in ten days. You have four.

In most states that is a hiring problem: offers, a payroll run, withholding tables, a comp policy re-rated for the new payroll, and a month you do not have. In Texas it is a purchasing problem. You call three outfits you have worked beside, agree a scope and a price with each, collect the same five documents, and eleven men stand on that site because you bought the work rather than hired the workers.

Two facts make that the ordinary shape of a Texas construction business, not a clever move. Texas has no personal income tax, so there is no state wage withholding to set up, no state W-4 equivalent, no monthly remittance. And workers compensation is elective for private employers under Labor Code s.406.002, so the single biggest cost of putting a man on your books is a decision rather than a bill. What sits between you and a crew you can field next week is a folder of five documents, two Labor Code provisions that decide whose policy the crew rides on, and one date in January.

The two shapes, priced

A payroll head and a company on your sub list cost different things, and the difference is a set of rates you can add up before you quote the GC back.

Put a real wage against it. A field hand at $60,000 costs you $4,590 in Social Security and Medicare, $42 in FUTA and $243 to the Texas Workforce Commission. That is $4,875 before a single dollar of comp premium, so 8.1 percent on top of the wage. Five of them is $24,375 a year of pure employer load, the TWC line only moves up from there, and comp on a trade rate sits above all of it.

A subcontractor's invoice carries none of it. You pay the invoice. There is no employer share, no quarterly report to the TWC, no W-2 run. What you buy instead is the folder, and the folder is cheap.

None of that argues for firing anybody. A core crew you control minute to minute belongs on payroll, and what an hour actually costs you sizes how many of those you can carry. The point is that Texas lets the eleven-man week and the four-man week be different sizes of the same company.

Price the scope and he stays a sub, price the hour and he becomes payroll

Classification decides which shape you are in, and Texas answers it in more than one place, so it pays to know which answer belongs to which agency.

For building and construction work, Labor Code s.406.141(2) defines an independent contractor as a person who contracts to perform work for the benefit of another and who is paid by the job and not by the hour or some other time-measured basis, is free to hire as many helpers as he wants and set their pay, and is free to work for other contractors while under contract to you. Three lines, written for your trade.

The general definition in s.406.121(2) adds the rest: a person who acts as the employer of his own employees, determines the manner and means of the work and the hours worked, furnishes the tools, supplies and materials, and possesses the skills required.

The Texas Workforce Commission runs its own test for unemployment tax, the common law direction-or-control test: a worker is an employee if the purchaser of the service has the right to direct or control him as to the final result and as to the details of when, where and how the work is done. TWC applies it through a twenty-factor list adapted from the IRS one and published as Form C-8, Employment Status: A Comparative Approach. The right counts even where you do not use it, which is why the contract wording matters as much as what happens on site.

Read together, the instruction is short, and it is how a sub crew runs anyway. Price the scope, not the hour. Let him bring his own men and pay them himself. Let him bring his own tools. Let him work for somebody else on Thursday. Set his start time, hand him your tools and pay him by the hour and you are running payroll with the wrong paperwork on it, whatever the invoice says. On government work the state prices the difference in both directions: under Labor Code s.214.008 anyone holding a services contract with a governmental entity owes the commission $200 for each individual misclassified, and subsection (b) puts the same $200 on their subcontractors. Quote that number in your own subcontract and your lower tiers price it too.

The folder, five items deep

Four of those five are a single afternoon per sub, done once. The fifth takes minutes in January when the first four exist and hours when they do not.

The W-9 goes in before the first check, not before the first 1099

Collect the W-9 on day one, because it answers two questions an invoice cannot.

It tells you whether a 1099 is owed. Line 3a of the W-9 is the federal tax classification. Payments to a corporation, including an LLC treated as a C or S corporation, are generally not reportable on a 1099-NEC. Payments to an individual, a sole proprietor, a partnership or a disregarded single-member LLC are. Two subs can send identical invoices and only one generates a form in January. Which entity your subs picked, and why it changes their own tax bill, is LLC versus sole proprietor in Texas.

It gives you 24 percent of leverage. Where a payee has not given you a TIN, backup withholding applies at 24 percent of the payment. That is not a punishment you take, it is a hold you place. A sub who has not sent the W-9 gets 76 cents on the dollar and a note saying the other 24 goes to the IRS until the form arrives, and W-9s stop being something you chase.

Keep the completed form. It never goes to the IRS, it is the evidence behind what you did or did not file in January, so park it with that year's 1099 records.

Read the sub's certificate in four lines, then diary the date

Four lines carry the whole document. General liability, with your company named as additional insured, and the endorsement pages behind it on any sub doing structural, height or hot work. Commercial auto, because the claim that arrives first on most sites arrives on wheels. The comp box, answered rather than left blank: a subscribing sub shows a policy, a non-subscribing sub shows something else, and that is a section below.

Then the expiration date, the line that costs money, because it changes without anybody telling you. A sub whose GL lapsed in March and whose certificate you filed in January is an uninsured sub with a piece of paper saying otherwise. Diary every certificate to its own expiry and replace it two weeks out. What a certificate has to say to survive an estimator reading it is in contractor insurance certificates in Texas.

Cover the sub yourself, bill him for it, and clear the GC's insurance exhibit

This is the Texas lever, and it is better used deliberately than discovered at an audit.

Labor Code s.406.123(a) lets a general contractor and a subcontractor sign a written agreement under which the general contractor covers the sub and the sub's employees. Subsection (d) lets you deduct the actual premiums, based on payroll, from the contract price owed him. Subsection (e) makes you his employer only for purposes of the workers compensation laws of this state, and nothing else. Subsection (f) wants a copy at your carrier by the tenth day after the contract is executed. Subsection (b) goes further still: if you carry comp for your own men and hire a sub with no employees, you are already his employer under the Act, and you may still deduct the premium.

Section 406.144 is the same mechanism for hiring contractors and independent contractors. You are not responsible for covering an independent contractor, his employees, helpers or subs until you both sign the agreement that changes it: you withhold the cost from the contract price and are, for that purpose, the employer. It works even where he has no employees, and a copy goes to your carrier.

On the real job, your eleven-man crew includes two outfits carrying no comp, because Texas did not make them. The GC's insurance exhibit says every worker on the site is covered. Bring those two under your own policy, deduct the actual premium from their contract price, and the exhibit is satisfied with one policy and one certificate. Your payroll did not change, and a man who gets hurt still gets treated. Whether you should carry that policy at all, in your own numbers, is the Texas workers comp decision.

Two pages that stop your carrier charging you premium on a sub

The lever runs the other way too, and this one shows up as money at the annual comp audit.

Labor Code s.406.122(a) makes anyone who performs work for a general contractor who is an employer under the Act an employee of that general contractor, unless he is operating as an independent contractor or is hired as an employee of one. That default is why an audit can land payroll on your policy that you thought belonged to somebody else.

Subsection (b) is the way out, in two conditions: the sub is operating as an independent contractor, and he has signed a written agreement with you evidencing a relationship in which he assumes the responsibilities of an employer for the performance of work. The first is how you run the job. The second is a paragraph in your subcontract template, in those words, or the state's version of it, DWC Form-085, Agreement Between General Contractor and Subcontractor to Establish Independent Relationship, with a copy to your carrier inside 10 days.

Labor Code s.406.145 adds a second form for the same money: a joint agreement declaring the subcontractor an independent contractor and not your employee, published by the Texas Department of Insurance as DWC Form-083, Joint Agreement to Affirm Independent Relationship for Certain Building and Construction Workers. Both sign, a copy goes to your carrier and to the Division on request, and under subsection (e) it covers every hiring agreement between you until the first anniversary of the filing date.

Subsection (g) is the sentence to keep, and it turns on the filing. Where you and the sub have filed the joint agreement, an insurance company may not require you to pay a premium for coverage of that independent contractor, his employees, helpers or his own subs, other than under an agreement complying with s.406.144. Two signatures and a copy to your carrier, renewed annually, and your policy is rated on your payroll rather than your sub ledger.

Hire the good sub who declined comp, three ways

A Texas sub who declined comp is not uninsured. The standard replacement is two products bought together: an occupational injury benefit plan, sold as occupational accident cover, which pays medical and wage replacement on the plan document's schedule, and employers liability cover, which defends the negligence claim the plan does not prevent.

That pair does real work. An injured man on a non-subscriber crew gets treatment the same morning, with a carrier behind the claim rather than a checkbook. What it lacks is the exclusive remedy in Labor Code s.408.001(a), which arrives with subscribing and nothing else, so a subcontract clause reading "workers compensation insurance" needs a comp policy behind it.

A good sub with occ-acc leaves you three live moves, and turning him away is not among them.

File three 1099s in January where five used to go out

For payments made on and after January 1, 2026, the Form 1099-NEC reporting threshold rose from $600 to $2,000, indexed for inflation from calendar year 2027. Backup withholding aligns to the same $2,000 level. That deletes a whole tier of January paperwork for a contractor who uses a specialist for two days a year.

Run a crew of nine subs through it. Four came back on the W-9 as LLCs taxed as S corporations, so they generate nothing. Two did $1,400 of work each, which cleared the old $600 line and misses the new one. Three cross $2,000 and get a form each. Five forms last year, three this year, filed by January 31 on figures your invoice ledger already holds. Count your information returns across the whole year before you paper-file: the 10-return threshold aggregates almost every type, W-2s included, so six W-2s and five 1099-NECs makes you an electronic filer. The wider picture of what a Texas contractor owes federally and to the Comptroller, with the dates, is Texas contractor taxes.

Twenty days after he starts, put his name on the record

Texas asks for one more thing, and it is seven fields. The Office of the Attorney General runs the Employer New Hire Reporting Program, and Family Code s.234.101(1) defines employee for it to include an independent contractor as the IRS defines one. The report is due within 20 calendar days of the hire, filed through the OAG's employer portal, and it wants employer name, employer mailing address, FEIN, then the worker's name, address, Social Security number and date of hire.

Six of the seven come off the W-9 you already hold, so it is the last step of onboarding rather than a separate errand. And under s.234.101(3) a man is newly hired again only after 60 consecutive days without earnings from you, so the sub who is on and off your jobs all season gets reported once, which leaves a dated state record behind the relationship your contracts describe.

What the GC above you will ask about your crew

Bid a package larger than your own headcount and the prequalification form starts asking about the people who are not on your payroll. Expect four. Who are your subs, by name, on this job. Do you hold current certificates of insurance from each. How is workers compensation handled for lower-tier workers on your scope. And what is your own EMR, if you subscribe.

Answer all four out of one folder and you are an easy sub to award work to. Answer by promising to find out and you are the file the estimator sets aside on bid day. Public work is stricter: under Labor Code s.406.096 a governmental entity must require written certification that each employee on the project is covered, and each subcontractor certifies up the chain, so a 1099 crew on a school job either carries comp or rides on yours. How the list gets built is getting on Texas GC bid lists, and the documents that travel with the bid are the Texas bid ready checklist.

The calendar that keeps it all standing

Six rows. That is the whole administrative weight of the eleven-man version of your company instead of the four-man version.

Build the folder once, then let the job get bigger

The Texas answer is small. No state withholding to set up. Comp is a decision you make with a broker rather than a form you are handed. The Labor Code defined a construction subcontractor in three lines, then gave you two signed pages that settle the comp question in either direction, and the January threshold more than tripled.

AEC Stack keeps that folder attached to the jobs it belongs to: each sub's W-9 and certificate with its expiry date, the signed subcontract, and every payment you made them in one ledger, which is where the January figures come from. There is no monthly subscription. The platform fee is 2.5 percent of each invoice processed through the platform, taken on the payment due date, so the software gets paid after you do.

Start with the arithmetic that told you to buy rather than hire: run your own wage and load through the contractor hourly rate calculator, then settle the coverage question against real numbers in the Texas workers comp decision. Then go and find the package that needs eleven men. Find work is the feed of Texas projects with a name, a date and somebody to call.