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.