The only people who can operate on construction sites are workers who have been recruited properly, who receive fair wages and of whom the main contractor and the state have a clear overview. As of 1 October 2023, subcontracting chains and construction sites must be registered in the new information system for all construction works where work lasts more than 30 working days and at some point at least 20 people are working on the site at the same time. The obligation also applies if the total volume of the construction or work exceeds 500 man-days.
According to Siim Tamm, Product Manager of the Development Department of the ETCB, the system has been in place for a year and is, among other things, a tool for construction companies. "Use of informal labour, as well as tax offences are often a problem at the end of the subcontracting chain. The main contractor may not be directly involved in such breaches, but nevertheless be aware that the rules are being breached. By now, the system that helps law-abiding companies check compliance with the requirements related to labour throughout the entire subcontracting chain is in place,” Siim Tamm from the ETCB explained.
The ETCB has created the Information System for Registration of Subcontracting Chain and Working Time (TTKI). Using this e-service of the ETCB, the main contractor must register its construction and enter its subcontractors. Each construction company, in turn, indicates in the system its subcontractors on a specific construction. Among other things, each company must indicate the employees it allows on the construction site.
Within one year, 550 constructions have been registered in the Information System for Registration of Subcontracting Chain and Working Time. According to Madis Laas, Head of the ETCB’s Income Tax Department, this figure is in the same range as the number of pre-notifications submitted to the Labour Inspectorate for the commencement of construction work. “We can see that the new system has proved its worth and has been introduced by many exemplary companies. But we are also aware of sites where the obligation to register has not been fulfilled,” Madis Laas from the ETCB admitted.
In order for the employees allowed to the construction to be able to register their presence, the main contractors must install a proper electronic registration system on the construction site. Systems with different functionalities are offered by many service providers in Estonia. Employers can order the smart cards which allow employees to register at each construction where they are allowed to work from the contractor that won the ETCB’s public procurement. If one has the smart card, other means of registration are allowed as well. For example, app-based solutions are gaining popularity.
Over 23 000 registration cards have been ordered within the year. “Using one standard card is significantly more convenient for both the main contractor and the employee than managing and carrying several cards for different construction sites. At the same time, the main contractor does not have to deal with issuing cards or keeping records of the cards and people,” stated ETCB’s Product Manager Siim Tamm.
Although the electronic registration system exchanges data with the information system automatically, each construction must first be entered into the information system of the ETCB. The ETCB is currently working on ensuring that in the future, constructions built on the basis of a single building permit do not have to be entered into the system separately, and that more and more data is pre-filled in the system with the data from the building register.
According to the Head of the ETCB's Income Tax Department, the ETCB also exercises supervision over construction companies. “In the coming weeks, we will be more likely to be seen on construction sites all over Estonia. The idea of closer monitoring is to make sure that all companies comply with their obligations and submit correct data in a timely manner. We communicate directly with companies that have not fulfilled their obligations. We visit construction sites to make sure that the electronic registration system is correctly used wherever it is mandatory,” said Head of the ETCB’s Income Tax Department Madis Laas.
The ETCB urges construction companies to ensure that all the obligations described in the Taxation Act are correctly fulfilled. Information on the obligation to register larger construction sites, subcontracting chains and employees allowed on the sites can be found on the website of the ETCB. Instructions on how to order the smart cards can also be found on the website.
Why is the Information System for Registration of Subcontracting Chain and Working Time useful?
- Helps to ensure fair competition and a level playing field for companies in the construction sector.
- Helps to reduce envelope wages and VAT fraud.
- Improves construction workers’ ability to defend their rights. Fewer disputes about the duration of working time.
- Increases transparency in the construction sector and allows for more effective supervision.
