A subcontractor is an independent contractor who, however, receives the order from an upstream main company (also called general contractor or general transferee). In this case, the conditions are to be agreed with the contractor placing the order in a contract for work or services. Subcontractors are often found in the trades as well as in the service sector.
Thanks to the cooperation with a subcontractor, the main company can concentrate on core business areas through outsourcing as well as avoid ancillary wage costs.
Whether a subcontractor may be used or not should be clarified with the original client. In doing so, he does not enter into any legal relationship with the subcontractor and has no liability claims against him. This can also be regulated by contract.
The main contractor is liable for the subcontractor – any fault on the part of the subcontractor is attributed to the main contractor. If the subcontractor causes performance problems, the main contractor is liable to the client. In the event of defects in the construction work, the client may assert claims against the main contractor – but the main contractor may pass on the claims to the subcontractor and demand that the defects be remedied.
1. subcontract orders
As a business start-up, you can achieve your goals much more quickly by subcontracting (parts of) tasks, or you can put yourself in a position to handle an order in the first place. In addition, you can bring in the specialists you need to handle a specific task on an order-by-order basis.
2. be a subcontractor yourself
On the other hand, you can also act as a subcontractor yourself. This opens up opportunities to work on interesting tasks. As a subcontractor, you can be involved in larger and more complex projects that you probably would not have been awarded in the context of a direct award, as your human and technical resources would not have been sufficient for this from the client’s point of view. The prospect of follow-up orders for you from the main contractor is quite realistic.
However, some caution and restraint is required when creating subcontractor employment relationships. This is because employment as a subcontractor with only one contractual partner is regularly regarded as bogus self-employment, is consequently illegal and extremely risky in financial terms.
Both when awarding contracts to a subcontractor and when accepting orders as a subcontractor, it is strongly recommended to jointly draw up a so-called contract for work or service before starting the actual activity. Such a contract should not only specify the type of performance and the nature of the work to be performed or the service to be rendered.
Subcontracting is a common practice in the execution of construction projects. It also increases the opportunities for small companies to participate in large contracts.
Request the following documentation from your subcontractors:
Current general confirmations
- Confirmation that the premium payment to Suva has been made in accordance with the Federal Law on Accident Insurance (UVG).
- Confirmation from a compensation office that payment of AHV contributions has been made.
- Confirmation of affiliation with a pension fund in accordance with the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG).
Current industry-specific confirmations
- Confirmation of compliance with the provisions of the collective labor agreement (AVE GAV).
- For companies that are not subject to an AVE CLA: Confirmation of compliance with the Posted Workers Act (EntsG).
- Confirmation of payment of contributions for early retirement solutions of the respective industry.
- Copy of the VAT confirmation including VAT no.
Notes for subcontractors
Even when subcontractors subcontract work to their subcontractors, it makes sense to ask for the documents mentioned above.
First Contractor Liability
In the case of the first contractor, the use of a subcontractor may give rise to various liability situations, such as the following in particular:
- The first contractor is liable to the work orderer for timely and correct (defect-free) work performance, whether he performs this work himself or has it performed by one or more subcontractors (liability for timely work performance / warranty law).
- The primary contractor is liable to the customer for damages caused by the subcontractor (liability for auxiliary persons).
- The first contractor is liable to the employee of a domestic or foreign subcontractor subsidiary to the subcontractor for compliance with the minimum wage regulations and for compliance with certain working conditions (liability under the Posted Workers Act).