How to Record Labour-Only Subcontractor Invoices
Recording the cost of a gang of workers supplied by a labour-only subcontractor (materials are provided by the main contractor).
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Work-in-Progress (WIP — Labour Sub) | Asset (+) | 22,000.00 | - |
| Accounts Payable (Labour Sub) | Liability (+) | - | 22,000.00 |
💡 Accountant's Note
Labour-only subcontractors are common in construction. Their costs are direct labor to WIP, separate from specialist subcontractors who also supply materials.
Practitioner & Systems Framework
💻 ERP Architecture
Enter these via the Subcontract module, not general AP. Ensure the system captures man-hours (via timesheets) alongside the financial value to support productivity analysis reporting. Apply retention deductions if dictated by the agreement.
⚠️ Audit Flags
Worker classification risks. Auditors assess if 'subcontractors' are actually defacto employees, which could trigger unrecorded payroll tax liabilities. They also verify timesheet sign-offs.
📄 Required Documentation
Labour-supply agreement, approved timesheets signed by site manager, and subcontractor tax invoice.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.