No later than Jan. 1, 2025, a drastic new requirement will go into effect for subcontractors in the construction, meat and moving industries.
Soon it will be prohibited for subcontractors in these sectors to subcontract the entire performance of a contract to another subcontractor.
The new rules call for adjustments in practices and aim to improve both transparency and working conditions within these vital sectors. The ban is designed to combat social fraud, illegal labor and social dumping.
In this article, we take you through the specific impact of this new regulation on the construction industry.
What works are covered by the ban?
Specifically within the construction sector, it concerns companies that perform works in immovable properties. Thus, the obligation does not rest only on companies covered by Joint Committee 124. Specifically, you can find below some examples of activities that will fall under this regulation.
|
|
|
What does the ban entail?
The new regulations prohibit subcontractors in the construction industry from using the full implementation Of an agreement with a co-contractor to be outsourced.
A subcontractor in this context is a company hired by a general contractor to perform part of a project or job. So these rules have no impact on the client or the general contractor.
Specifically, it prohibits subcontracting the entire contract. It is therefore still allowed to subcontract part of the performance of the contract with a co-contractor, provided that the subcontractor itself performs at least 1% of the performance of the contract.
Here it is not sufficient to retain only the coordination of the performance of the contract and subcontract the rest. By doing so, the legislator wants to prevent subcontracting from being purely financial in nature.
In addition, it is still possible for a client and a general contractor to subcontract 100%. The regulations focus purely on subcontractors.
Below we specifically outline in an example what can still be done and what can no longer be done.
Concrete example: A general contractor of an apartment building may hire a subcontractor to take care of the electrical installation, and this subcontractor, in turn, may still hire a specialized subcontractor for home automation, for example, provided that at least part of the electricity is performed by the subcontractor itself.
What do you risk if you don't comply as a subcontractor?
A subcontractor who, in violation of this new prohibition, outsources his entire contract to one or more subcontractors or retains only its coordination will be punished with the highest penalty under the Social Penal Code (Level 4):
- A prison sentence of 6 months to 3 years (automatically converted to a high additional fine for legal entities) and/or a criminal fine of 4,800 to 56,000 euros.
- Or; An administrative fine of 2,400 to 28,000 euros.
In addition, the subcontractor exposes itself to the collection of overdue social security contributions and the aggrieved workers can claim compensation.
The obligation rests specifically on subcontractors. Thus, they will also bear the consequences for non-compliance.
A client, as well as the general contractor, remain unaffected.
From when?
The new ban will take effect on a date to be determined by royal decree, but no later than Jan. 1, 2025.
Now what?
The many (construction) companies that systematically outsource contracted work entirely and/or take on coordination only will have to re-examine their business model. Unless they are general contractors, they will have to perform at least part - even if only 1% - of their contract in-house as of Jan. 1.
Ongoing contracting agreements whose performance exceeds that effective date of the regulations will need to be revised, if necessary.
