Undeclared Work Among Subcontractors: Ensuring Compliance and Managing Social Contribution Reassessment

In France, combating against undeclared work remains a priority due to the estimated loss in contributions which amount to between 7 and 9 billion euros per year. In 2024, the Urssaf (the French social security collection agency) recovered 1.586 billion euros due to reassessments related to undeclared work, an amount up 34% compared to 2023. The rise in reassessments is supported by the implementation of financial solidarity from principals, a mechanism that the Urssaf describes as a “strategic lever to optimize recovery”.

The Principal's Duty of Vigilance Regarding Undeclared Work

When the contract price is equal or greater than €5,000 excluding VAT, the principal must verify, both at the time of entering into the contract and every six months thereafter, that the subcontractor is compliant with its obligations.

Verification of the subcontractor’s compliance requires the submission of proof of registration and a certificate of vigilance issued by the Urssaf. If the subcontractor is a foreign company, the principal must request the intra-community VAT number for companies based in EU or, for companies outside the EU, a document that include the company’s identity and address, as well as a document certifying that the subcontractor is up to date with its social declarations and the payment of the related contributions.

The issuance of these documents creates a presumption of compliance by the principal with its duty of vigilance. This presumption can be rebutted if the principal has not ensured the consistency of the documents transmitted.

The Reassessment of the Principal

When a subcontractor has been the subject of an official report for undeclared work, the Urssaf may reassess the subcontractor and/or enforce the financial solidarity of the principal.

The procedure will be as follows:

1. Urssaf will first request documents. At the same time, the principal must immediately order its subcontractor to stop employing undeclared workers by registered letter. Failure to do so may result in the principal’s financial solidarity being engaged, even if it has fulfilled its duty of vigilance.
2. If the Urssaf deems the evidence provided unsatisfactory, it will send a letter of observations. This letter must comply with specific formalities. Upon receipt of the letter of observation, the principal has 30 calendar days to respond. Additionally, the principal may request an extension of the deadline to 60 days. It is recommended to request this extension in order to open discussions with the Urssaf and to approach the public prosecutor's office to request the communication of the report on undeclared work drawn up against the subcontractor.
3. If the Urssaf does not abandon the reassessment or a settlement is not signed, the Urssaf will send a formal notice. Two options are then available:
   • Pay the amount claimed by the Urssaf within 30 days of notification of the formal notice or present a settlement plan. The principal will then be eligible for a 10-point reduction on the surcharge rate applied by the Urssaf.
   • File a lawsuit with the amicable dispute resolution and then the social division of the court of law. The latter will oblige the Urssaf to communicate the report drawn up against the subcontractor.
4. Finally, if the principal has paid the sums claimed by the Urssaf, it will have the right of recourse against the subcontractor.

Sanctions Requiring Great Vigilance

Financial Solidarity

The principal may be held jointly and severally liable alongside its subcontractor:

• The payment of taxes, duties, and compulsory contributions, as well as penalties and surcharges owed by the subcontractor to the French Treasury and social welfare organizations
• Where applicable, the reimbursement of sums corresponding to public aid received
• The payment of remuneration, allowances and charges due by the subcontractor for employees who have not undergone one or several formalities related to employment declaration or payslip issuance.

Reimbursement of contributions reductions

The principal may also be required to reimburse the reductions in contributions it has benefited on salaries below 1.6 times the minimum wage (€2,882.88 gross in 2025), up to a limit of €75,000. In the event of a repeat offense, the ceiling is raised to the total amount of the sums charged to the principal under financial solidarity.

Administrative sanctions

The principal may be denied, for a maximum of five years, the benefit of public aid referred to in Article D. 8272-1 of the Labor Code (such as partial activity allowance, aid for apprenticeship or integration contracts). It may also be required to reimburse the amount of aid received during the 12 months preceding the issuance of the official report.

Additionally, the prefect may order the temporary closure of the company for a maximum period of three months and exclude it from public procurement for a maximum period of six months.

Criminal sanctions

The principal's failure to fulfill its obligation of vigilance is sufficient to establish the moral element of the offense. It may then be sentenced to three years' imprisonment and a fine of €45,000 (€225,000 in the case of a legal entity). In the event of aggravating circumstances, the penalties are increased to five years' imprisonment and a fine of €75,000 (€375,000 in the case of a legal entity).