Contractor’s Obligations and Liability
The Contractors' Liability Act obliges contractors to ensure that their contractors, as contractors and employers, fulfil their legal obligations. On this page, we explain the intricacies of the law and how you can make it easier for your company to meet its obligations.
Contractor’s Obligations and Liability
Note: The Act on the Contractor’s Obligations and Liability when Work is Contracted Out is amended on 1.9.2015.
The Act on the Contractor’s Obligations and Liability when Work is Contracted Out (22.12.2006/1233) obligates a client to check that their contracting partners fulfill their legal obligations as contracting party and employer. The Act aims at preventing “grey”, or undeclared, economy, and its purpose is to promote equal competition between companies as well as compliance with terms of employment. The Regional State Administrative Agency for Southern Finland is the body that monitors compliance with the Act in Finland.
The Act stipulates that the client requests and the contracting partner supplies information and certificates that are no older than three (3) months:
- An account of whether the enterprise is entered in the Prepayment Register as stipulated in the Prepayment Act (1118/1996), the Employer Register and the Value Added Tax Register as stipulated in the Value-added tax Act (1501/1993)
- An extract from the Trade Register
- A certificate that demonstrates that the enterprise does not have tax debt as defined in paragraph 2 of subsection 1 in section 20 b of the Act on the Public Disclosure and Confidentiality of Tax Information (1346/1999), or an account given by an official regarding the tax debt
- Certificates of pension insurances arranged for employees and of pension insurance premiums paid, or an account that a payment agreement on outstanding pension insurance premiums has been made
- An account of the collective agreement or the principal terms of employment applicable to the work
- An account of provided occupational healthcare
- A certificate of mandatory accident insurance required in the building sector
If an employee’s employer or a party of a subcontracting agreement is a foreign company, information corresponding to the clarifications and certificates according to the Contractor’s Obligations Act must be submitted in the form of register extracts as stipulated by the laws of the country of business or similar certificates, or in another generally acceptable manner.
A foreign contracting party must also provide clarifications cited in paragraphs 1 and 3 in subsection 1, if the foreign contracting party has a Business Identity Code as defined in the Business Information Act (244/2001). If the foreign contracting party sends posted workers (defined in paragraphs 1 and 3 of subsection 2 in section 1 of the Posted Workers Act) to Finland, the client must check the social security cover of the posted workers before work under a work contract (as defined in the Posted Workers Act) begins.
In addition to subsection 2 of section 5, the contractor’s obligations to check contain the obligation to check that all posted workers have a valid certificate of their social security cover before they begin work. (22.5.2015/678)
More information on the application of the Act is available on the website of the Regional State Administrative Agency for Southern Finland.
Obligations under the Private Limited Liability Act
The Regional State Administrative Agencies of Southern Finland supervise compliance with the Act in Finland. The Act requires the contracting authority to request and the contractor to provide the contracting authority with information and reports up to three (3) months old:
- A statement as to whether the company is registered in the Prepayment Register and the Employers' Register in accordance with the Prepayment of Taxes Act (1118/1996), and in the Register of Value Added Taxpayers in accordance with the Value Added Tax Act (1501/1993).
- Certificate of registration.
- A statement that the company has no tax debts within the meaning of Section 20b(1)(2) of the Act on the Disclosure and Confidentiality of Tax Information (1346/1999) or a statement from a public authority on the amount of tax debts.
- Certificates of insurance for employees' pension insurance and payment of pension insurance contributions or proof that an agreement has been concluded to pay the pension insurance contributions due.
- A statement of the collective agreement or basic working conditions applicable to the job.
- Evidence of the provision of occupational health care.
- In the construction sector, the organisation of statutory accident insurance.
- The documents should also be checked for any business prohibitions imposed on the company's responsible persons. The contract may not be concluded with a party whose documents required by law show that the person responsible for the company is prohibited from carrying out business activities.
If the contracting party is a foreign company
If the employer of the worker or party to the subcontract is a foreign undertaking, the information equivalent to the statements and certificates required by the law on private limited liability must be provided in the form of registration certificates or equivalent certificates in accordance with the legislation of the country of establishment or by any other generally acceptable means.
In addition, the foreign contractor shall submit the reports pursuant to paragraphs 1(1) and (3) if the foreign enterprise party to the contract has a business and business identification number within the meaning of the Business and Business Information Act (244/2001). If the foreign contractor sends posted workers referred to in paragraphs 1 and 3 of Section 1(2)(1) and (3) of the Posted Workers Act to Finland (posted worker), the contracting entity shall clarify the determination of the social security of the workers at the latest before the start of the work under the contract referred to in this Act.
The contracting entity's obligation to ascertain the social security status of posted workers in connection with construction work includes, in addition to Article 5(2), the obligation to ascertain that all posted workers have valid certificates of social security status before they start work (22.5.2015/678).
More information and material
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