New ban on financial subcontracting in the construction sector

What does the new ban entail?

The new ban is set out in Article 184/1/5 §1 of the Social Penal Code and stipulates that, as of 1 January 2025, subcontractors can no longer:

• Subcontract the entire scope of work entrusted to them;
  

• Outsource all operational tasks to other sub-subcontractors while retaining only the coordination of a project.

Important to note: These rules do not apply to main contractors or project owners. They may still subcontract their entire assignment. However, subcontractors must now perform at least a portion of the work themselves. This portion is currently set at a minimum of 1% of the work, but it must involve actual operational work—coordination or preparatory tasks do not count.

What does this mean for subcontractors?

Subcontractors must now play an active role in the execution of projects, which means they must:

• Execute a part of the work themselves with their own personnel;
  

• Not limit their role to coordination or preparatory tasks (such as planning or material transport).

The law is mainly aimed at intermediaries who no longer carry out any operational work themselves. However, it will still be possible to work with temporary employees as long as the subcontractor also carries out work.

A specific additional restriction applies to the moving sector: In addition to the prohibition on financial subcontracting, the subcontracting chain may no longer consist of more than three levels of subcontractors

Why has this legislation been introduced?

The aim of this law is to make subcontracting chains more transparent and streamlined. In the current system, assignments are often entirely passed down to other parties without the active involvement of the subcontractor. This has led to social dumping and unfair competition. By requiring subcontractors to carry out at least part of the work themselves, the government aims to prevent these practices.

What are the penalties for non-compliance?

Failure to comply with these rules can have serious consequences. The penalties fall under level 4 sanctions, which include:

• Prison sentences: For individuals, this can range from 6 months to 3 years. For legal entities, this is converted into a fine between € 24,000 and € 576,000.

  
  

• Criminal fines: Between € 4,800 and € 56,000, multiplied by the number of employees involved (up to a maximum of 100).
  

• Administrative fines: Between € 2,400 and € 28,000, also multiplied by the number of employees involved (up to a maximum of 100).

Additionally, the court may impose further measures, such as a ban on participating in public tenders or obtaining concessions for a period of three to five years.

What does this mean for your business?

As a subcontractor, you must now carefully verify whether you are still personally carrying out tasks that fall under your contract with the principal contractor/client. For main contractors, little changes, except that they remain responsible for ensuring their subcontractors comply with the rules.

The impact on the construction sector will be significant, as many companies may need to adjust their working methods to comply with the new regulations.