Contractor liability in Finland: what to check in a foreign labour subcontracting chain

Finland's Contractor Liability Act 1233/2006 requires the ordering party to obtain register entries, tax debt status, pension insurance proof and the applicable collective agreement from a contract partner before signing. None of those reports may be older than three months on the signing date. Where foreign labour is used, the Aliens Act 301/2004 adds a separate right to work check on site.

What the duty to check covers, and when it is collected

The duty arises when the ordering party uses hired labour or signs a subcontract for work carried out on its own premises or work site. Act 1233/2006 does not ask whether the partner is Finnish or foreign. For a foreign company the same information is requested as equivalent documents from the authorities of its country of establishment, and this is where schedules stretch: a register extract and a tax certificate from another member state often take weeks, while the Finnish equivalent arrives in days.

The Act lists the following items.

• Entry in the prepayment register, the employer register and the VAT register.
• A trade register extract, or the equivalent extract from the register of the country of establishment.
• A certificate of tax payment or of tax debt, together with any payment plan.
• A certificate that pension insurance has been taken out and that contributions have been paid.
• An account of the collective agreement applied to the work, or of the main terms of employment.

The three month limit runs to the day the contract is signed, not to the day work starts. If a purchase is prepared in spring and the contract is signed four months later, the spring file is already out of date at signing and the duty has in fact been neglected. This is the single most common error in long construction contracts, where negotiation and site start sit far apart.

The workable practice is to tie collection to the signature date rather than to the tender date. The file is requested again if signature slips far enough that the oldest document would pass three months. In a continuing contract relationship the reports are refreshed during the term, and the collective agreement record is rechecked whenever the content of the work changes.

For a foreign contract partner, collection should start earlier than for a domestic one. Obtaining a register extract, a tax certificate and a pension certificate from another country, and translating them, takes its own time, and that time is the only part of the process the ordering party still controls before the contract exists.

The occupational safety authority and the negligence fee

Supervision of contractor liability is centralised within the occupational safety authority at the Regional State Administrative Agency for Southern Finland, and it covers the whole country. In practice the same authority inspects a site in Rovaniemi and a logistics centre in Turku. An inspection usually opens with a document request setting a deadline for the file on a named contract, and continues with a site visit where needed.

The sanction under Act 1233/2006 is a negligence fee. In construction activity the fee is imposed at the raised level, because the legislator judged the chaining risk in that sector to be higher than elsewhere. The fee falls on the ordering party, not on the subcontractor, and it is not removed by the subcontractor later turning out to be in order. Failing to obtain the reports is itself the act that is penalised.

The right to work check on site is a separate duty

The reports under the Contractor Liability Act concern a company. They say nothing about whether an individual worker may work in Finland. That second duty comes from the Aliens Act 301/2004, which obliges the main contractor and the developer on a construction site to ensure that every foreign worker present on that site holds the right to work.

In practice the residence permit card or other basis is checked before the first shift and recorded in the site access list. For a third country national the permit is often tied to an occupational field, so a permit issued for a welder does not carry a move to scaffolding work. The verification methods used across the union are set out in right to work verification checks, and the common structure behind the single document is covered in the single permit directive explained.

A typical case runs like this. A Finnish construction firm buys masonry work from an Estonian subcontractor who brings Ukrainian workers to the site. The ordering party collects the register extract and the tax certificate but skips the pension insurance certificate, because the partner promises to send it later. The contract is signed. Four months on, the Regional State Administrative Agency for Southern Finland inspects the site, requests the contract file and finds one report missing entirely and two that were already more than three months old at signing. On the same visit, two workers turn out to hold permits issued for a different field.

The consequences then split in two. The missing reports produce a negligence fee for the ordering party, raised because this is construction. The right to work failure goes into a separate process, and those workers leave the site immediately. The contract slips by the share of work they were doing, and finding replacement labour mid season is slower than arranging it in advance. Neither outcome required anything more to prevent than a list of five documents and a date check before signature.

Contractor liability is not an annex to a contract but a standalone duty whose fulfilment is proved by dates. Once the five reports are in hand on time and the right to work is checked before the first shift, an inspection is a matter of producing documents.