Why subcontracts require systematic oversight
In the construction, installation, and technical services sectors, many Swiss SMEs do not carry out entire projects with their own staff: part of the work is assigned to specialised firms. Subcontracting provides operational flexibility, but it transfers to the internal client — general contractor, main contractor, or project manager — responsibility for verification, coordination, and financial traceability.
A non-compliant subcontractor can generate unexpected costs: uncovered accidents, disputes over performance, payment delays, or VAT errors. In Switzerland, liability towards third parties (Art. 55 and 101 CO) and, in the construction sector, the main contractor's joint liability for compliance with minimum wage conditions (LDist/ODist) may involve the commissioning company if preliminary checks are not documented. For SMEs, the risk is not only legal: construction margins eroded by unbudgeted extra work or invoices not aligned with the contract.
This guide outlines an operational approach in three pillars — insurance, billing, and cost control — applicable to construction sites, renovations, building services, and industrial maintenance, with references to current federal law and SIA contractual practice.
Regulatory framework: what governs subcontracting in Switzerland
Subcontracting is not governed by a single dedicated law, but by an overlapping set of provisions. Knowing them allows you to define protective contractual clauses and consistent onboarding checklists.
| Area | Reference | Relevance for the commissioning SME |
|---|---|---|
| Contractual relationship | Art. 363 et seq. CO (contract for work and services) | Defines obligations, price, acceptance, and liability for defects |
| General conditions for construction | SIA 118:2013 (C2:2026 supplement) and sector technical standards | Governs subcontracts, variations, guarantees, and site documentation |
| Accident insurance | LAINF / LAA (UVG) | Mandatory insurance for employees; essential verification before site access |
| Social security | LAVS / LPP and LDist / ODist | Main contractor's joint liability for minimum wage conditions; mandatory OASI/BVG contribution verification |
| Withholding tax | LIFD Art. 100 and Art. 83 et seq. (personnel without CH tax domicile) | Obligation of the recipient of the taxable service to withhold tax on employment income of foreign or cross-border workers |
| Civil liability | Art. 55 and 101 CO | Art. 55: damage to third parties with possible proof of due diligence; Art. 101: contractual breaches attributable to qualified auxiliary subcontractors |
| VAT on construction services | LTVA Art. 21 and Art. 25 | Construction services generally at the standard rate (8.1%); sale and rental of residential property excluded from tax |
SIA 118 distinguishes between authorised subcontracting (specified in the specifications or approved in writing) and unauthorised subcontracting. For SMEs, including in the framework contract a list of approved companies or a prior approval procedure reduces disputes and simplifies document control.
Verifying subcontractor insurance
Before a subcontractor accesses the site, the commissioning SME must obtain and archive up-to-date certificates. A verbal declaration is not enough: in the event of a claim, the client's insurer may seek recourse if due diligence is not proven.
Accident insurance (LAA)
Every subcontractor with employees must be insured with a cantonal accident insurance institution or an equivalent approved insurer. Request a valid LAA certificate for the current year, indicating the number of insured persons and the sector of activity.
For sole proprietorships without employees, verify whether the owner is insured as a self-employed worker (voluntary or mandatory UVG/LAA depending on the sector). An uninsured self-employed electrician on site exposes the commissioning company to significant risks.
Third-party liability and contractors' all-risk insurance
Business liability insurance covers damage to third parties caused by the subcontractor's activity. Verify limits adequate to the value of the site — for medium-sized construction projects, at least CHF 5–10 million is often required.
Contractors' all-risk insurance (construction damage insurance) is particularly relevant for structural work, excavations, and foundations. Exclude it from the specifications only if the risk is genuinely transferable and documented.
Vehicle and equipment insurance
Vehicles and machinery brought to site must be insured. For cranes, platforms, and heavy vehicles, request policies indicating the validity period and coverage for damage to third parties and property.
Record licence plate, vehicle type, and date of entry to site in the site log: this facilitates reconstruction in the event of an incident.
Legal guarantee and construction defects insurance
For construction work subject to the legal guarantee for construction defects (Art. 368 CO), verify that the subcontractor has the financial capacity and, if contractually required, construction defects insurance or a bank guarantee covering structural defects.
Retain certificates for at least five years from delivery of the work: the limitation period for construction defects is five years from delivery, with notification within 60 days of discovery (CO revision in force from 1 January 2026).
Pre-site insurance checklist
- ✓Valid LAA/UVG certificate (expiry date verified)
- ✓Business liability policy with limit compliant with the specifications
- ✓Contractors' all-risk insurance, if required for the type of work
- ✓Up-to-date OASI/AI/IPG certificate (contribution compliance)
- ✓BVG confirmation for companies with subject personnel
- ✓Copy of ID and residence permit for foreign workers, if applicable
- ✓Registration in the subcontractor's commercial register (active UID)
Billing and accounting documentation
Subcontract billing must be traceable from the quote through to final settlement. Common errors: invoices without reference to the subcontract, VAT applied at the wrong rate, or accounting entries not linked to the site code.
Contract and subcontract order. Every subcontract should be based on a written contract or signed order specifying: scope, price (lump sum, measured, or mixed), schedule, payment terms, delay penalties, and a clause authorising further subcontracting. The order number must appear on every subsequent invoice.
Progress payments and work statements. For subcontracts of significant value, provide for billing based on progress (SIA) or agreed milestones. The SME verifies that the invoice matches the statement approved by the project manager or site foreman before authorising payment.
Accounting in Accountex. Record every subcontract invoice on a dedicated cost account (e.g. 4400 «Purchase of services» or 4500 «Subcontracts») with analytical allocation to the project/site. Link the invoice to the supplier (UID), order number, and, where applicable, the partial acceptance document. This allows real-time comparison of actual cost against the site budget.
| Document | Minimum content | Timing |
|---|---|---|
| Subcontractor quote | Item detail, quantities, units, offer validity | Before the order |
| Order / subcontract agreement | Agreed price, terms, reference to specifications | Before work begins |
| Site log | Attendance, variations, directives, incidents | Daily |
| Subcontractor invoice | UID, correct VAT, order no., reference period | On progress or at completion |
| Payment certificate | Approved amount, retentions, guarantees withheld | Before each payment |
| Final report / acceptance | Confirmation of compliance, any reservations | On delivery |
VAT on construction subcontracts: watch the rate
In Switzerland, construction services (building, renovation, maintenance) are generally taxable at the standard rate of 8.1%. The reduced rate of 2.6% and the special rate of 3.8% (hospitality sector) do not apply to construction work. The sale and rental of residential property are excluded from tax under Art. 21 para. 2 LTVA. The SME must verify the rate shown on the invoice: a systematic error by the subcontractor affects input tax deduction and may lead to adjustments during a VAT audit.
For foreign subcontractors providing services in Switzerland, assess the obligation to register for VAT if annual turnover exceeds the threshold (CHF 100,000 worldwide turnover with services in CH) and any reverse charge of tax on the purchase of foreign services, in accordance with current rules.
Construction site cost control: budget, variations, and margins
Subcontracting directly affects site margin. Effective control starts from the initial budget and continues with ongoing monitoring, not only at final accounts.
Budget by line item
Break down subcontract costs by trade (demolition, building services, painting, etc.) and align each item with an analytical code. This allows immediate identification of which subcontract is over budget.
Order vs. actual
Compare weekly or fortnightly the amount ordered, invoiced, and paid for each subcontractor. A growing delta signals unapproved variations or measurement errors.
Retentions and guarantees
Withhold a percentage (typically 5–10%) until acceptance or expiry of the guarantee period. The retention must be recorded as a liability and released only when conditions are met.
Managing variations and extra work
Variations are the main source of budget overruns. Under SIA practice, every change to the original design must be documented in writing — subcontractor quote, approval by the client or project manager, update of the site budget — before execution. Billing extra work without a written order is one of the most frequent causes of dispute.
For measured subcontracts (hour/man, m², linear metre), define in the contract the units of measure, unit prices, and the measurement procedure (signed measurement records). The site foreman or project manager must validate quantities before the subcontractor issues an invoice.
Key indicator: subcontract cost / site revenue
Monitor the percentage of total subcontract cost relative to contracted site revenue. A common operational threshold in construction SMEs is to keep subcontracts within 60–75% of net revenue, depending on the share of own work. Persistent exceedances indicate insufficient initial pricing, choice of overly expensive subcontractors, or variations not recovered from the end client.
Withholding tax and foreign workers
If the subcontractor employs foreign personnel without domicile or residence in Switzerland, the commissioning company may be obliged, as recipient of the taxable service, to withhold tax at source on employment income (Art. 100 LIFD). The obligation applies in particular to temporarily posted workers and cross-border service providers; remuneration paid to independent subcontractors (Art. 363 CO) is generally not subject to withholding tax.
Verify with your tax adviser whether the subcontract falls within exemption cases provided by treaties or cantonal ordinances. Document nationality, permit, and duration of service for every foreign worker present on site.
The main contractor's joint liability for compliance with minimum wage conditions (LDist/ODist) requires requesting, before the first payment, a compliance certificate issued by the OASI or compensation fund. Without an up-to-date certificate, many general contractors suspend payments: this is a legitimate contractual lever and asset protection.
Common mistakes and how to avoid them
Unauthorised subcontractor
The subcontractor assigns part of the work to a third party without approval. Solution: contractual clause prohibiting sub-subcontracting except with written consent and documentary verification at the third level as well.
Advance payment without guarantee
Large advances to financially weak subcontractors. Solution: limit advances to the value of materials delivered to site and require a bank guarantee or surety for amounts exceeding 20% of the contract.
No analytical allocation
Invoices recorded only in the general account without a site code. Solution: require the project code on every entry and reconcile budget vs. actual monthly in Accountex.
Expired insurance certificates
One-off archiving at the start of the site without renewal. Solution: automatic reminder 30 days before each policy expires and block site access if not renewed.
Recommended workflow for SMEs
A standardised process reduces administrative burden and standardises the quality of control across different sites:
- 1Selection and qualification. Verify UID, references, financial capacity, and collect the complete insurance package.
- 2Contract and budget. Formalise the order, allocate an analytical budget line, and define billing methods.
- 3Execution and tracking. Site log, quantity validation, approval of progress statements.
- 4Controlled payment. Verify invoice vs. order, withhold guarantee, update site actuals.
- 5Closure and archive. Acceptance, release of guarantee, document archiving for the limitation period.
Conclusion: subcontracts under control
Managing subcontracts in a Swiss SME is not limited to receiving and paying invoices. It requires documented insurance checks, clear contracts, analytical accounting by site, and ongoing monitoring of budget and variations. The initial administrative investment — checklists, certificates, analytical codes — pays off in reduced legal risks, disputes, and cost overruns.
With a standard procedure and accounting software that links suppliers, orders, and cost centres by project, business owners and fiduciaries can maintain visibility over every subcontract and protect site margin from the start of the work through to completion.