← BlogFebruary 3, 20235 min readEditorial teamDEUAENRU
For businesses
Liability in a Contract for Work: What the Client Is Responsible For
Awarding work under a Werkvertrag hands off the job, but not every responsibility. For minimum wage, social contributions and taxes, the client can be liable too. Here are the main risks and how to limit them.
Liability for the minimum wage
Under the German Minimum Wage Act, a business that commissions another business to carry out works or services is liable for that business’s minimum wage obligations. The liability is that of a guarantor who has waived the right to demand that the debtor be pursued first. In practice, the subcontractor’s employees can turn directly to the client if they were not paid the statutory minimum. Since October 2022 it has been €12 per hour.
The same principle applies in sectors with minimum wages under the Posted Workers Act, such as construction.
Liability for social security contributions
In construction, a business that commissions construction services from another business is liable for that business’s social security contributions as a guarantor. It can avoid liability if, without fault of its own, it could assume that the subcontractor met its obligations. A common proof is the clearance certificate (Unbedenklichkeitsbescheinigung) from the health insurance fund. Similar rules exist for the parcel delivery sector.
Fines for violations
Anyone who commissions works or services on a significant scale and knows, or negligently does not know, that the contractor does not pay the minimum wage risks a fine. The range goes up to €500,000. Exclusion from public contracts is also possible.
Tax duties in construction
For construction services, the client must withhold 15 percent of the payment as construction withholding tax (Bauabzugsteuer) and pay it to the tax office. This does not apply if the contractor presents a valid exemption certificate (Freistellungsbescheinigung). Overlooking this makes you liable for the tax.
Defects and warranty
Under a contract for work, the contractor owes a defect-free result. For defects, the client may demand rectification, a price reduction or damages. A clear scope of work and documented acceptance are decisive.
How to limit the risk
- Check the business registration, liability insurance and clearance certificates.
- In construction, ask to see the exemption certificate.
- Agree on information and audit rights and an indemnity for minimum wage claims.
- Require A1 certificates for posted staff.
- Make sure the contract is genuinely applied. More in our checklist on sham contracts for work and the article on contracts for work in construction.
- Choose partners carefully, see how staffing providers select and vet workers.
This article is not legal advice. For specific contracts, consult a lawyer.
Frequently asked questions
Is the client really liable for the subcontractor’s minimum wage?
Yes. The client is liable like a guarantor who waived the right to demand pursuit of the debtor first. Employees can claim directly from the client.
How can I protect myself regarding social contributions?
With a clearance certificate from the health insurance fund and careful vetting of your partner. Special liability rules apply in construction.
What is the Bauabzugsteuer?
For construction services, 15 percent of the payment must be withheld unless an exemption certificate is presented.
Does a contract clause protect against liability?
Only partly. An indemnity clause works between the parties, but statutory liability toward employees remains.
