Work Orders and Subcontractor Billing

On a typical residential project the main contractor does not lay a single brick — thekedars (labour contractors) do, under work orders. That means a second billing layer runs beneath every client RA bill: subcontractors measuring, billing and getting paid by the contractor. This layer is where margins actually leak. A contractor who checks the client's certification to the rupee but pays labour bills on trust routinely loses 3–5 per cent of contract value in silent over-billing, double-counted areas and unrecovered consumables. This lesson covers the billing mechanics — for the work order document itself (clauses, legal standing, TDS and labour-law compliance fields), see our detailed work order format guide, which pairs with this lesson.

The work order is a billing rulebook

Treat every work order as answering five billing questions before work starts. If your WO cannot answer them, billing disputes are pre-booked:

1. What is the rate, and per what unit? Rs. per sqft, per cum, per kg of steel, per point (electrical) — with the unit defined unambiguously.
2. What is the measurement basis? This is the one that causes the most fights. "Slab area" can mean plan area of the slab, area including chajja and lift projections, or built-up area including staircase mid-landings. Write the basis into the WO: for example, "slab plan area measured out-to-out of slab edge, excluding chajja projections; staircase waist slabs measured separately on plan".
3. What is included in the rate? For an RCC labour rate: shuttering, steel fixing, pouring, deshuttering, curing? Who supplies nails, binding wire, cover blocks, shuttering oil?
4. What gets deducted? Retention percentage, advances and their recovery schedule, consumables debited, rework recovery.
5. When is payment due? Against the contractor's own certification, not "when the client pays" — unless a back-to-back clause is explicitly agreed and understood.

Back-to-back discipline

"Back-to-back" means the subcontract mirrors the main contract's terms — same measurement rules, proportional retention, payment linked to client certification. It protects the contractor from paying for work the client rejects. But use it consciously:

• Mirror the measurement basis exactly. If the client pays you for slab concrete in cum with IS 1200 deductions, but you pay your labour per sqft of slab area, you carry a conversion risk. That is acceptable — sqft labour rates are standard — but you must know your conversion factor and check it per pour.
• Mirror retention proportionally, commonly 5 per cent on labour bills, released after the client's defect liability period covers that work — and say so in the WO.
• Do not blindly pass payment risk down. Pure "pay-when-paid" clauses breed disputes and drive good labour contractors away; a capped payment period is fairer and keeps crews on site.

Worked example: checking a labour contractor's RA bill

Setup: RCC labour work order at Rs. 285 per sqft of slab plan area (rate covers shuttering, steel fixing, concreting and deshuttering labour; contractor supplies all materials including consumables — consumables actually drawn by the labour gang are debited at cost). Retention 5 per cent. Advance of Rs. 2,00,000 given at mobilisation, recovered Rs. 1,00,000 per bill. The labour contractor is an individual, so income-tax TDS at 1 per cent applies under the 194C regime (2 per cent if it were a firm or company); being a small labour-only supplier under the GST services registration threshold, he is unregistered and his bill carries no GST — common on small sites, but confirm the position with your CA.

The subcontractor submits a bill claiming 5,240 sqft for the two slabs cast this period. Your joint measurement per the WO basis (plan area excluding chajja projections) gives 4,820 sqft. The 420 sqft difference — chajjas and the lift overhang the WO excludes — would have cost 420 x 285 = Rs. 1,19,700. This is why the measurement basis lives in the WO, and why subcontractor measurements go into the MB or a joint measurement sheet just like client measurements.

The corrected bill:

Check: 13,73,700 - 68,685 - 1,00,000 - 18,400 - 13,737 = 11,72,878. Round the payment if you like — but compute exact first, then round transparently.

How this protects your money in a dispute

When a thekedar walks off site claiming "hisaab baaki hai" (money is owed), the party with the ledger wins. A signed WO stating the measurement basis, joint measurement sheets for every bill, and a ledger showing gross billed, deductions and net paid leaves nothing to argue about except genuine measurement — which you re-measure jointly and settle. Without them, the dispute becomes his diary versus your memory, the crew stops mid-slab, and you pay a premium to restart. The same records protect the thekedar too: a labour contractor holding signed measurement sheets cannot be squeezed at final settlement. And remember that daily-wage naka labour engaged directly needs none of this — but the moment work is given on rate to a gang, the WO-and-ledger discipline starts, whatever the job size.

The subcontractor ledger

Run one ledger page per work order, updated at every bill, with running totals of: gross billed, retention held, advances outstanding, consumables debited, TDS deducted, net paid. This is the same deduction-ledger discipline as Lesson 3, one level down. Without it, three predictable failures occur: advance recovery silently stops after a bill or two; retention held is forgotten and either never released (dispute) or double-released (loss); and consumable debits are waived in the rush of a slab-pour week.

Free-issue material deserves special care. If the contractor issues steel or cement to a labour-plus-material subcontractor, every issue goes through a material issue slip, and the WO states the allowed consumption norm and wastage limit (Module 6 covered reconciliation). At each bill, compare issued quantity against theoretical consumption for the measured work — excess beyond the wastage allowance is debited at the WO-stated recovery rate, on the bill, not "adjusted later".

Common mistakes

• Paying on the subcontractor's own measurement. Always measure jointly against the WO basis; the 420 sqft above is a typical single-bill leak.
• Rate creep across bills. The WO rate is the rate; verbal "diesel has become costly" escalations must go through a written WO amendment or not at all.
• No TDS on labour bills. Payments to a labour contractor above the 194C thresholds (Rs. 30,000 single or Rs. 1,00,000 aggregate in a financial year, as currently applied) attract TDS; skipping it creates the principal's tax exposure, not the subcontractor's.
• Unwritten extra work. "Also make the parapet while you are up there" becomes an unpriceable claim at final bill. Every scope addition gets a WO amendment with a rate — the next lesson covers exactly this discipline at client level.
• Holding retention with no release trigger. State the release event (client DLP completion for that work) in the WO, and diary it.

What comes next

Subcontractor billing is contained chaos; client-side variations are open-field chaos. The next lesson brings the same write-it-first discipline to variations and extra items — pricing changes without poisoning the relationship.