MKB Juristen drafts custom legal documents
It is best not to cobble together or copy important contracts, terms and conditions, and other legal documents yourself. We help entrepreneurs on a budget with customized legal solutions, clear costs upfront, and practical explanations.
- Custom contracts, terms and conditions, and legal documents
- Budget-friendly and clear about the costs upfront
- Request a free consultation or a no-obligation quote
What is a subcontracting agreement? It is the agreement by which a main contractor outsources part of the work that he himself has undertaken from a client to a subcontractor. Legally, this concerns a contract for work within the meaning of Article 7:750 et seq. of the Dutch Civil Code: the subcontractor undertakes to produce a work of a tangible nature for a price. The agreement regulates what is to be produced, at what price, within what timeframe, and who is liable for what.
The short answer
- What: an agreement under which a main contractor subcontracts work to a subcontractor.
- Legal: contract for work, Article 7:750 et seq. of the Dutch Civil Code.
- Who: main contractor and subcontractor, often in construction, engineering, or installation.
- Core: description of the work, price, schedule, delivery and liability.
- Note: chain liability for payroll taxes and the risk of bogus self-employment.
What exactly is a subcontracting agreement?
In subcontracting, there are three parties: the client, the main contractor, and the subcontractor. The client assigns a task to the main contractor, for example, the construction of an industrial hall. The main contractor remains ultimately responsible to the client but outsources parts, such as installation work or masonry. He concludes a separate subcontracting agreement with each subcontractor.
The subcontractor has no contractual relationship with the client. His counterparty is the main contractor. This means that the subcontractor holds the main contractor liable for payment, and that the main contractor holds the subcontractor liable for the quality and timeliness of the work.
The legal basis: contract for work
A subcontracting agreement is a form of contracting work. Article 7:750 of the Dutch Civil Code defines contracting as the agreement whereby the contractor undertakes, outside of an employment relationship, to produce and deliver a work of a tangible nature, for a price to be paid by the client. The same rules apply to subcontracting; the subcontractor is then the contractor and the main contractor the client.
The regulations in the Civil Code determine, among other things, when a work is completed, who bears the risk, and how liability for defects works. Because many of these rules are of supplementary law, you can deviate from them in the agreement. That is precisely why a good written agreement is important: without agreements, you fall back on the statutory standard, which does not always suit your situation.
What is subcontracting used for?
Subcontracting is most common in construction, installation technology, infrastructure, and industrial projects, but the principle applies more broadly. A main contractor engages subcontractors when:
- A specialization is required that he does not have in-house, such as roofing or electrical engineering.
- the capacity to carry out the entire work ourselves within the schedule.
- Peak load must be handled without hiring permanent staff.
- Efficiency is achieved by outsourcing parts of the work to specialized companies.
Chain liability: a significant risk
Anyone who outsources work must take chain liability into account. Pursuant to Article 35 of the Collection Act 1990, commonly referred to as the Chain Liability Act, a main contractor can be held liable for payroll taxes failed to be remitted by their subcontractor. If the subcontractor employs seconded personnel, the hirer's liability under Article 34 of the Collection Act also applies.
You limit this risk by doing business with reliable parties, by depositing part of the contract sum into a blocked escrow account, and by keeping the administration in order. In the agreement, you stipulate that the subcontractor fulfills his tax obligations and provides proof thereof.
Bogus self-employment and the DBA Act
A second point of attention is bogus self-employment. If a subcontractor effectively works as if they were employed, with a hierarchical relationship and a personal obligation to work, the Tax and Customs Administration may classify it as an employment relationship. In that case, the rules of the DBA Act apply, and payroll taxes become payable. A clear subcontracting agreement focusing on a result rather than an employment relationship helps to limit this risk, although the actual execution is ultimately decisive.
A practical example
A contractor with ten employees takes on the construction of a small industrial warehouse. He is unable to handle the roofing work himself, so he outsources it to a specialized roofing company. The subcontract specifies which part of the roof, which materials, the contract sum, the completion date, and that the roofer duly remits his payroll taxes. A G-account is agreed upon for a portion of the sum. When the roof leaked later, the main contractor was able to demand repairs based on the established quality requirements, without any discussion about who was responsible for what.
Honest recommendation
For a small, one-off, and straightforward job with a regular subcontractor you know well, you do not always need a lawyer. A short, clear order confirmation detailing the work, the price, and the schedule may suffice, especially if the amounts are limited and the risks are low.
Do engage legal assistance for larger projects, long-term collaborations, when chain liability is involved, or when there is doubt regarding bogus self-employment. With a sound agreement, you can then prevent being held liable for unpaid payroll taxes later on or getting bogged down in liability disputes.
Delve deeper into the content with the article on drafting a subcontracting agreement and read what it costs to have one drawn up. You can find a ready-made template on the subcontracting agreement.
Frequently Asked Questions
It is the agreement by which a main contractor subcontracts a part of his contracted work to a subcontractor. Legally, it is a contract for work under Article 7:750 et seq. of the Dutch Civil Code. The agreement regulates the work, the price, the schedule, the completion, and the liability.
The main contractor holds the assignment from the client and remains ultimately responsible for it. The subcontractor executes an outsourced part and has a contract only with the main contractor, not with the client. Payment and liability run through the main contractor.
Pursuant to Article 35 of the Collection Act 1990, the Chain Liability Act, a main contractor may be liable for payroll taxes failed to be remitted by the subcontractor. Working with reliable parties and using a G-account limits this risk. In the case of seconded personnel, Article 34 also applies.
A written agreement is not legally required, but it is highly recommended. Without agreements, you fall back on the statutory rules of contracts for work, which do not always apply. In writing, you avoid disputes regarding price, schedule, and liability.
If a subcontractor effectively works as an employee, with authority and a personal duty to work, the Tax and Customs Administration may classify it as an employment relationship. In that case, the rules of the DBA Act apply, and payroll taxes are payable. The actual performance is decisive, not just the contract.
Especially in construction, installation technology, infrastructure, and industrial projects, but the principle applies more broadly. It is used to engage specialists, scale up capacity, or handle peak loads without hiring permanent staff.
The main contractor remains responsible towards the client. The main contractor can hold the subcontractor liable for defects in the outsourced part, provided that the quality requirements and delivery are properly documented. Clear agreements regarding liability prevent subsequent disputes.
