Contractor’s Obligations and Liabilities in Construction Operations
The Act on the Contractor’s Obligations and Liability when Work is Contracted Out (Tilaajavastuulaki) falls within the scope of labour law, but in the construction sector it is typical to partially subcontract as well as to use temporary agency workers, when the Act on the Contractor’s Obligations and Liability when Work is Contracted Out is to be applied.
The Act on the Contractor’s Obligations and Liability when Work is Contracted Out is applied to every contractor:
which uses temporary agency workers in Finland or
in whose premises located in Finland or in whose worksite a subcontractor’s employee works on the basis of a subcontractor agreement. Responsibilities must be related to the contractors normally performed work-related tasks or, transportation related to normal activities.
In construction and construction-related repair, care and maintenance activities the Act on the Contractor’s Obligations and Liability when Work is Contracted Out is applied in addition to the above-mentioned to all developers acting as contractors and to all contractors acting as overall contractors at a common work site, regardless of whether the contractor is an employer or not.
The Act on the Contractor's Obligations and Liability when Work is Contracted Out is not applied when the duration of the work by the temporary agency worker or workers does not exceed a total of 10 working days or the value of the subcontract without value-added tax is less than 9 000 euros. When calculating the threshold values, the work is considered to have continued without interruption if the work or work outcome performed for the contractor is based on successive, uninterrupted contracts or with only short breaks between them.
According to the law, before engaging in a contract, the contractor must ask the contractual partner and the contractual partner must deliver to the contractor:
a statement of entry in the tax prepayment register, employer register and VAT register,
extract from the trade register or equivalent information,
statement of tax payment data,
certificate of taking the employee’s pension insurance and execution of pension insurance premiums or a statement stating that a payment agreement has been made on outstanding pension insurance premiums,
report on the applicable collective agreement or key terms,
report on the organization of occupational health care, and
a certificate of admission of statutory accident insurance (agreements on construction activities).
In respect of foreign contracting parties, certificates and statements must be delivered in accordance with the national legislation of the contracting parties’ place of establishment or other generally accepted way. If a foreign contracting party has a Finnish business identity code, reports on tax payment issues and of entry in the tax prepayment register, employment register and VAT register must be delivered to the contractor.
In regards of posted workers, the contractor must clarify that every posted worker sent by the contracting party has a valid certificate on the determination of social security of the employee before the posted worker begins working.
During the time of control, certificates and statements cannot be more than three months old. If an agreement continues for over 12 months, the contracting party must deliver the contractor every 12 months a statement of tax payment data and a certificate of having worker’s pension insurance, and having paid pension insurance premiums or, a statement stating that a payment agreement has been made on outstanding pension insurance premiums.
If a new contract is made with the same contracting party before 12 months has passed from the previous implementation of the clearing obligation, there is no need to ask for new clearances if the contractor does not have reason to suspect changes in circumstances (i.e. change of responsible persons).
Neglecting the clearance obligation can lead to negligence fee imposed by the Regional State Administrative Agency (Aluehallintovirasto), the amount being 2 000 – 20 000€. Raised negligence fee, of the amount of 20 000 – 65 000 euros, can be imposed if a contract is made with an undertaking with a ban from commercial activities (entrepreneur or undertaking’s managerial staff) or a contract is made knowing, that the contracting party does not have intention to fulfil its statutory payment obligations as a contracting party or employer.
The contractor has duty of confidentiality from the tax, tax liability, pension or pension payment data. The right to data access of representatives of employees of the contractor is specifically defined by law.