Subcontractors: Independent companies that provide a service
Subcontractors are independent companies. Explained in practical terms: In the construction industry, for example, a client awards the construction of a building to a main contractor. The main contractor awards the individual contracts (building installation, electrical installation) as work performance to independent companies with several employees, the subcontractors.
When do I define as subcontractor?
Subcontractors are independent companies that provide services in the craft industry, construction industry, logistics, transport industry, but also in the service sector. Only when a company performs a work service for a main contractor does the independent company become an independent subcontractor.
Subcontractors have no contractual agreement with the main contractor. The contract for work and services always exists only between the main contractor who awards the partial services and the subcontractor.
Legal situation of subcontractors
As mentioned before, there is no contractual agreement and therefore no legal relationship between the main contractor and the independent contractors. The subcontractor is solely obligated to the main contractor, as he “only” acts as a vicarious agent.
The main contractor is liable for the subcontractor. How to proceed then should always be contractually stipulated in advance. In addition, a subcontractor declaration should be submitted. This declaration shows that the subcontractor has behaved correctly in all legal matters relating to the contract (commercial law, tax law, social security law).
If there are deficiencies, the main contractor can claim them from the main company. If this occurs, the main contractor also has the possibility to claim these from the subs. In most cases, there is a remedy for the defect.
In the past, the main contractor was liable as guarantor for unpaid social and accident insurance contributions. Now, if the main contractor can provide proof of a clearance certificate , i.e., proof of the suitability, efficiency, integrity and expertise of the independent company, the main contractor is excluded from liability.
Working with foreign subcontractors
In our free guide, we explain how to successfully work with subcontractors from abroad and which conditions you need to take care of:
Why use subcontractors?
On the one hand, the price-performance ratio is excellent. If a service is outsourced to a subcontractor, there are no wage and ancillary wage costs, as these are independent companies. The main contractor only pays for the service within the scope of the agreed work contract.
Another advantage for the main contractor is flexible personnel planning. If bottlenecks are expected, there is no need to lease or hire extra personnel. Through a subcontractor team, one obtains competent workers for the execution of a work performance.
Subcontractors from experts in the placement
One can rely on a placement expert who already has experience with subcontractors. Furthermore, the main contractor also benefits from special expertise, experience and skills that subs, i.e. independent companies, bring with them.
When subcontracting, the support of placement experts is advisable in order to rule out problems in advance. As a mediator of highly qualified independent subcontractors, Subauftrag has been the first point of contact in this area for 10 years. Learn more here:
What keeps some companies from using subs?
The most common reason given by companies is the fear of bogus self-employment. However, this problem is easy to recognize for an entrepreneur with experience. We have summarized the most important points once again:
- Bogus self-employed subcontractor is only working for a main contractor
- Working hours and performance of services are precisely specified
- Or the activity could also be performed by employees of the main contractor
- Company address and registered office are missing
- The pseudo-self-employed subcontractor has no employees
- The client provides all working materials, tools, building materials and construction equipment.
- The bogus self-employed person is bound by instructions
Agreement for cooperation with subcontractors as independent companies
When working with independent companies, you should have already drawn up a VOB contract or a contract for work and services in advance. If you are unsure about subcontracts, you can also bring in an expert who has the necessary knowledge.
In a contract for work and services, the subcontractor and the main contractor agree that a previously agreed work will be performed successfully and without defects for a certain work contract amount. Parts such as the bill of quantities and the construction description are fixed parts of the agreement.
The more complete the description is fixed, the higher the probability of excluding errors during implementation. You could also make a verbal agreement, but experts such as Subauftrag.com recommend always fixing it in writing.
If the main contractor can actually perform the agreed activities himself, the client’s consent must be obtained for contracts.
Payment and termination of subs
The work wage is the compensation paid by the main contractor to its independent subs when they have successfully performed the work. Depending on what was agreed in the contract for work or what the estimate stipulates, the sum becomes due after acceptance of the work. If defects are found, the main contractor is entitled to partial payments.
The work contract can be terminated by either party. The main contractor can terminate the subs without notice and without cause. However, the independent contractors only have this right to a limited extent. They may only terminate if the circumstances are demonstrably unreasonable and the duty to cooperate is not fulfilled. If the self-employed company proves that it is entitled to remuneration, this is also paid by the main contractor.
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