Contractor chains in the construction sector: significant limitations for subcontractors from 1 January 2025
Although subcontractors can bring a wealth of specialisation and expertise into technical construction projects, contractor chains are also often associated with social dumping and the exploitation of workers. Complex and lengthy contractor chains are sometimes artificially created to make non-genuine posting set-ups less visible. Inspired by similar initiatives in other European countries and to curb abuses, the Belgian legislator is introducing significant limitations in vertical contractor chains in the construction sector from 1 January 2025.[1]
1. What does the new law say?
Under the new legal provision[2], a subcontractor is prohibited from subcontracting the entire performance of an agreement that it has entered into to a direct contractor (or to several contractors). In addition, a subcontractor is no longer allowed to limit its intervention to coordination activities only, when subcontracting an agreement.
2. Which activities are in-scope?[3]
The rule targets activities in the construction sector. These are defined in a rather broad way with reference to the activities covered by Article 30bis[4] of the Social Security Act dated 27 June 1969 (see the activities for which a declaration of works and a withholding obligation may apply). This implies that all types of works to immovable goods are in-scope. So the rule is not limited to subcontractors falling under Joint Committee n° 124’s scope of application.
3. Who does the new rule affect?
The rule applies to subcontractors. The main contractor, i.e. the direct contractor of the principal, is not targeted. A main contractor still has the right to fully subcontract the agreement to one or more subcontractors.
Non-Belgian companies also come within this new rule’s scope of application.
A few examples demonstrate the new rule’s scope:
Example 1
The main contractor can subcontract the agreement (100%) to subcontractor 1. Subcontractor 1 is not allowed to subcontract the entire agreement to subcontractor 2.
Example 2
The main contractor can subcontract the agreement (100%) to subcontractor 1. Subcontractor 1 is allowed to subcontract the agreement to subcontractor 2 as subcontractor 1 performs a part of the agreement itself (e.g. 1%) and this 1% covers work other than coordination work.
Example 3
The main contractor can subcontract the agreement (100%) to subcontractor 1. Subcontractor 1 is not allowed to subcontract the entire agreement to subcontractor 2 (50%) and subcontractor 3 (50%).
4. Risk in the case of non-compliance
If a subcontractor does not comply with the new rule, then there is a risk of a level 4 penalty, which is an administrative fine ranging between EUR 2,400 and EUR 28,000 or a criminal fine of between EUR 4,800 and EUR 56,000 (the latter may possibly be combined with imprisonment for a period varying between 6 months and 3 years).
5. Practical impact
Any construction company acting as a subcontractor that substantially relies on other subcontractors and/or limits its involvement to coordination activities should revise its business model given the upcoming legal changes. The new limitations will immediately apply, including for subcontracting arrangements that started before 1 January 2025.
If you would like further information regarding this topic, then please contact Emma Van Caenegem (Emma.VanCaenegem@altius.com) or Philippe De Wulf (Philippe.DeWulf@altius.com). They are available to answer any practical questions you might have.
[1] The entry into force date is 1 January 2025, unless a prior entry into force date is confirmed by Royal Decree (which up to this newsletter’s publication date has not happened).
[2] Article 147 et. seq. of the Act of 15 May 2024 regarding adjustments to social criminal law and various employment related provisions (“Wet houdende wijziging van het sociaal strafrecht en diverse arbeidsrechtelijke bepalingen”/ “Loi modifiant le droit pénal social et diverses dispositions en droit du travail”).
[3] This newsletter focuses only on the construction sector. The new rule will also apply to the moving sector and meat sector. This newsletter does not consider the additional specific features applying to the moving sector.
[4] Article 30bis § 1, 1° (a) of the Social Security Act dated 27 June 1969.
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