The purpose of the Act on Contractor’s Obligations and Liability is to ensure that the terms of employment are observed
Under the act, enterprises concluding contracts on temporary agency work or subcontracted labour must ensure that their partners observe their statutory payment obligations. The Act on Contractor’s Obligations and Liability promotes equal competition between enterprises and observance of the terms of employment.
Under the act, a contractor must check whether its contracting partner is entered in the Prepayment Register and the Employer Register and is registered as VAT-liable in the Value Added Tax Register. The contractor must also ascertain that the contracting partner has paid its taxes and taken out pension insurances and check the type of collective agreement or principal terms of employment that it applies to the work. Furthermore, the contracting partner must provide information showing that it is in compliance with its occupational health care obligations. The same information must also be obtained on foreign companies.
The Act on Contractor’s Obligations and Liability is applied if the duration of the work by temporary agency workers exceeds 10 days or the value of the subcontract agreement exceeds 9,000 euros, excluding value added tax. This refers to the total value of the agreement, without separating the share of work performed.
The contractor need not request the above-mentioned information, if it has good reason to trust that the contracting partner will discharge its statutory obligations. Such contracting partners include the state, municipalities, parishes, public limited companies, state enterprises, companies wholly owned by a municipality, or the equivalent foreign organisations or enterprises.
A similar contractual relationship based on trust between the contractor and the contracting partner can also be regarded as having been established on the basis of earlier contractual relationships. In construction activities, accounts in accordance with the Act on the Contractor’s Obligations and Liability must also be requested from companies with established operations, or when the contractual relationship between the contractor and the contracting partner can be regarded as established.
An account must also be requested of the employment accident insurance taken out. In construction activities, the contractor is under a constant obligation to ensure that the posted workers have social security cover.
Consequences of a failure to perform the checks
If the checks required under the act are not performed, the contractor must pay a negligence fee, which is between 2,000 and 20,000 euros.
The raised negligence fee may be imposed if the contractor concludes a contract for work by a trader who has been barred from conducting business. It may also be imposed if, in spite of fulfilling its obligation to check, the contractor shows a clear disregard for the fact that the contracting partner has no intention of complying with its employer or other obligations. In that case the negligence fee is between 20,000 and 65,000 euros. The decision on the payment is made by the Regional State Administrative Agency under whose jurisdiction the occupational health and safety authority supervising compliance with the act falls.
Special provisions for posted workers
If a foreign contracting partner posts workers to Finland, the contractor must obtain information on the posted workers' social security cover before starting the work under the contract at the latest. The contractor must also check the social security details of the workers posted after the start of the work.
Provisions on the obligations of the contractor and the contracting party in situations where workers are posted to Finland by a company established in another country are laid down in the Posted Workers Act.
More information about posted workers
Supervision of the Act: AVI Southern Finland
Law-drafting: Jan Hjelt, jan.hjelt(at)tem.fi