Subcontracting in Construction: Limits and the Subcontracting Book

A Labour Inspection on any building or civil engineering site usually begins at the same point: a request for the Subcontracting Book. This is no minor detail or a simple piece of red tape that can be improvised. Subcontracting in construction: limits and the subcontracting book are strictly regulated by Law 32/2006, a piece of legislation created to bring order to the infinite subcontracting chains that used to dilute health and safety responsibilities.

For a site manager or a construction company director, understanding how far the chain of contracts can go is not just a legal obligation, but a measure of financial protection. If a third-tier subcontractor fails to meet their salary or safety obligations, joint and several liability can escalate to the main contractor, directly affecting the profitability of the project.

The Legal Framework: Law 32/2006

The regulations are clear on this matter. The primary objective of the Law regulating subcontracting in the Construction Sector is to ensure that companies involved in a project have a minimum and genuine structure. This means that "shell companies" or mere intermediaries that provide no technical value or material resources are not permitted.

To be able to subcontract, any company must meet several prior requirements:

1. Possess their own productive organisation.
2. Have the necessary material and human resources.
3. Assume the risks, obligations, and responsibilities inherent to business activity.
4. Be registered in the Register of Accredited Companies (REA).

If a company does not meet these points, they should not be on-site. Verifying these requirements is the first step before signing any subcontracting agreement.

Subcontracting Limits: How Far Can You Go?

The law establishes a pyramidal structure with specific limits to prevent the precarisation of work. The general scheme is divided into levels, starting from the client (developer).

The First and Second Tier

The contractor (the company contracting directly with the client) can subcontract the execution of specific work packages to subcontractors or sole traders as they see fit. This constitutes the first tier of subcontracting.

In turn, this first subcontractor can subcontract to a second tier. Up to this point, management is usually straightforward and does not require special authorisations beyond the entry in the corresponding book.

The Third Tier and the End of the Chain

It is at the third tier where severe restrictions appear. A second-tier subcontractor can only subcontract work if exceptional circumstances exist, such as highly specific technical specialisation or unforeseen events on-site.

For this third tier to be legal, it requires:

• Prior approval from the project management team (Dirección Facultativa).
• A detailed justification of why this additional level is necessary.
• An express entry in the Subcontracting Book.

Important: A third-tier subcontractor can no longer subcontract to anyone else. The chain is definitively cut here.

The Role of the Sole Trader (Autónomo)

The sole trader occupies a special place in this hierarchy. A sole trader can be hired by the main contractor or any subcontractor, but the sole trader cannot subcontract the work to third parties or other sole traders. If a sole trader has staff under their charge, they legally act as a company and the subcontractor rules apply to them; however, if they work alone, they are the final link in their branch of the site's organisational chart.

The Subcontracting Book: A User Manual

The Subcontracting Book is the document that reflects, in real-time, who is working on-site and under whose orders. Each project must have its own book, authorised by the relevant labour authority.

Who Must Hold the Book?

The obligation to obtain and maintain the book falls exclusively on the main contractor. If there are several main contractors on a site (for example, one for the structure and another for the mechanical and electrical installations, both contracting directly with the client), each must have their own Subcontracting Book.

What Information Must it Contain?

It is not enough to simply write down the name of the company. For the book to be valid and useful during an inspection, it must include:

• Identification of the subcontractor (Name, Tax ID, REA number).
• Planned start and end dates for the works.
• Object of the contract (which work package or section they will execute).
• Identification of the person directing the works.
• Approval from the project management team if the third tier of subcontracting is reached.

The book must remain physically on-site, available to the labour inspectorate, health and safety coordinators, and employee representatives.

The Register of Accredited Companies (REA)

One cannot talk about subcontracting without mentioning the REA. It is a public register where construction companies must register to prove they comply with capacity and occupational risk prevention requirements.

Before allowing a subcontractor to enter for a site survey or to unload material, the site administrator or site manager must verify that their REA registration is current. Registration is valid for three years and must be renewed before it expires. Working with a company without a valid REA is a serious infringement that carries heavy fines for both the subcontractor and the contractor employing them.

Risks and Sanctions for Non-Compliance

Failure to comply with subcontracting rules does not just lead to administrative sanctions; it can also lead to criminal liability in the event of an industrial accident. The Law on Infractions and Sanctions in the Social Order (LISOS) categorises faults into three levels:

1. Minor: Not having the Subcontracting Book on-site or not completing it correctly.
2. Serious: Exceeding the permitted subcontracting levels without authorisation or hiring companies without a valid REA.
3. Very Serious: Fraudulent subcontracting to evade responsibilities or falsifying data in the book.

In addition to fines, which can exceed €100,000 in the most serious cases, the main contractor assumes joint and several liability for any unpaid wages or Social Security debts left by subcontractors during the project period.

How to Manage Subcontractors Without Losing Your Mind

Managing 15 or 20 subcontractors on a medium-sized project is a logistical challenge. Between contracts, tax and Social Security compliance certificates, REA, insurance policies, and staff time tracking, the volume of paperwork is unmanageable.

Historically, this was managed with lever arch files and Excel sheets that became outdated within two days. Today, many construction companies use specialised software to centralise this documentation. There are powerful options on the market such as Procore or Presto, as well as more agile solutions specifically designed for the local market like Constrack.

These tools allow subcontractors to upload their own documentation to a portal, and the system automatically sends alerts if insurance has expired or if a company's REA registration has lapsed. This offloads administrative work from the site manager, allowing them to focus on execution and the project schedule instead of chasing paperwork.

Personnel Control in Subcontracting

One of the most critical points is attendance control. The law requires us to know who is on-site at all times. If an emergency occurs, the contractor must have an accurate list of their own and third-party workers present. Using mobile apps for clocking in, linked to site assignments, greatly facilitates this task and ensures that only authorised personnel with the correct documentation can register their working day.

The Role of Project Management in Subcontracting

The project management team (Dirección Facultativa) is not a mere spectator in this process. As mentioned, their role is decisive when there is a need to move to the third tier of subcontracting. Their signature in the Subcontracting Book is what validates the exceptional nature of the measure.

However, their responsibility does not end there. They must ensure that the subcontracting chain does not affect safety. If the Health and Safety Coordinator detects that a subcontractor does not have the promised resources, they have the power (and the obligation) to propose the termination of that contract or the suspension of works.

Practical Cases and Common Exceptions

There are situations that often generate doubts in day-to-day site operations:

• Material Supplies: Companies that limit themselves to delivering material (concrete, bricks, joinery) without performing installation are not considered subcontractors for the purposes of Law 32/2006. They do not need to be in the Subcontracting Book or have an REA. But beware: as soon as the supplier sets foot on-site to install equipment, they become a subcontractor.
• Plant Hire: If you hire an excavator without an operator, it is a supply contract. If you hire it with an operator, that company is a subcontractor and must meet all legal requirements.
• Employment Agencies (ETTs): ETTs can provide workers for tasks that are not especially dangerous, but those workers are integrated into the structure of the company that hires them. They do not count as an additional level of subcontracting.

Conclusion

Managing subcontracting in construction: limits and the subcontracting book is one of the pillars of risk management in any construction firm. It is not just about complying with the law to avoid fines, but about ensuring that the project's production chain is solid, professional, and solvent.

Keeping the Subcontracting Book up to date, verifying the REA of every participant, and ensuring that permitted levels are not exceeded are tasks that require rigour. Although paper remains the official legal format for the authorised book, relying on digital tools for document management and cost control by work package ensures the margin for error is kept to a minimum.

If you are looking for a simpler way to control your projects, staff, and subcontractor documentation, you can try Constrack for free for 14 days and see how it adapts to your daily workflow. Ultimately, the goal is the same for everyone: to finish the project on time, with quality, and without legal surprises.