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UHY TietoAkseli newsletter 2/2015: The Contractor’s Liability Act will be amended on 1 September 2015

The Act on the Contractor’s Obligations and Liability when Work is Contracted Out will become more unified and stricter from 1 September 2015. According to the Ministry of Employment and the Economy, the purpose of the reform is to improve the competitive preconditions of enterprises that fulfil their obligations, improve the fulfilment of employees’ working conditions, and the appropriate arrangement of social security.

Contractor’s obligations towards checking matters will become stricter

A contractor must, in advance, check whether its contractual partner is entered in the Prepayment Register and Employment Register, and registered as being VAT-liable in the Value Added Tax Register. The obligation to check matters will also be expanded to apply to occupational health care. The contractor cannot sign an agreement, unless its partner, if it is an employer, has an arrangement for occupational health care services in place.

Tax debt does not prevent the conclusion of an agreement

In the future, the contractor may sign an agreement with an enterprise carrying a tax debt, provided that the amount of the tax debt and the contractual partner’s ability to fulfil its payment obligations has been assessed. The contractor may check the public tax debt register for information about taxes paid by the partner. In case the contractual partner is a foreign enterprise, the contractor must also ensure that it is entered in tax-related registers in Finland.

The upper limit for the obligation to check matters will increase

The lower limit of the application of the Contractor’s Liability Act will be increased such that, in the future, the Act will not be applied if the value of the compensation of a subcontracting agreement is less than EUR 9,000.

Negligence fees will increase

The negligence fee and the raised negligence fee will be increased, and the raised negligence fee will be applied to all agreements subject to the Contractor’s Liability Act in the future. After the amendments enter into force, the negligence fee will be EUR 2,000-20,000 and the raised fee EUR 20,000-65,000. The amount of the sanction depends on the seriousness of the neglect, among other factors.

Provisions concerning pension insurance

As for information on pension insurance, more provisions will be added to the Act with regard to foreign temporary agency employees. A contractual partner must provide the contractor with an account of how the employees’ social security is determined, before the work begins. The contractor must ensure that its partner reports the information required. In terms of construction activities, a provision will be registered in the Act, according to which the contractor is under a continuous obligation to ensure that the partner’s temporary agency employees have valid certificates of how their social security is determined. A negligence fee may be imposed on a contractor for any violation of this obligation.