← BlogOctober 14, 20225 min readEditorial teamDEUAENRU
For Companies
Contract for Work in Construction: Why Agency Work Is Banned There
Special rules apply to construction companies and developers: staff for construction work generally may not be supplied. The legally safe route is the contract for work.
The agency ban in construction
Under section 1b of the Temporary Agency Work Act (AÜG), supplying employees to construction businesses for work usually carried out by blue-collar workers is generally prohibited. Exceptions exist only within narrow limits, for example between construction businesses covered by the same framework and social fund collective agreements. A violation can lead to the invalidity of the contract and to fines.
The contract for work as an alternative
In construction the contract for work is the usual route. The contractor owes a specific result, such as a shell structure, drywall or the installation of a system, and organises personnel and sequence itself. It is important that the contract is also run that way. Otherwise there is a risk of the accusation of covert agency work. We explain the distinction in Avoiding a Sham Contract for Work and Contract for work vs. temporary agency work.
Duties for clients in construction
- Construction withholding tax (Bauabzugsteuer): for construction services clients usually have to withhold 15 percent of the consideration and pay it to the tax office unless an exemption certificate is available.
- Minimum wage liability: as client you are liable like a guarantor for your subcontractors’ payment of the minimum wage.
- Immediate registration: in construction employees must be registered with social security at the latest when they start work and must carry ID.
- A1 certificate: for posting from other EU countries the A1 certificate applies.
- Sector minimum wage: the main construction trade has its own collectively agreed minimum wages, higher than the statutory minimum wage.
What to watch in the contract
Describe the work and acceptance as precisely as possible, regulate warranty, liability and insurance, and define who provides materials, equipment and safety gear. Proof of registration, minimum wage and social fund contributions should also be agreed.
Checklist for developers and general contractors
- Describe the activity clearly as a work with a result
- Check the subcontractor’s exemption certificate
- Request minimum wage and social fund proof
- Clarify ID and registration duties
- Request A1 for foreign workers
- Leave the right to give instructions clearly with the contractor
Frequently asked questions
Is agency work in construction always banned?
In principle yes for work usually done by blue-collar workers. Exceptions are narrow.
What is the construction withholding tax?
Clients withhold 15 percent of the consideration for construction services unless an exemption certificate exists.
Is the client liable for the minimum wage?
Yes, like a guarantor for the minimum wage of its subcontractors’ employees.
Does the statutory minimum wage apply in construction?
Sector minimum wages apply, which are above the statutory minimum wage.
