If work is carried out by an external company on the basis of a contract for work and labour, the question arises as to how the services provided are invoiced by the contractor. Among other things, billing on an hourly wage basis is possible. What evidence can the client demand with this billing model?
Possible billing models for work contracts
In principle, the following models can be considered for the invoicing of contracts for work:
- Unit price
- All-inclusive price
- Hourly wage basis
When billing according to a Unit price the items required for the fulfilment of the contract for work and services are listed and a specific price is set for each item. Alternatively, it is possible for the contracting parties to agree on a Fixed or all-inclusive price for the entire agreed service. When invoicing on Hourly wage basis an hourly rate is agreed and the service is remunerated according to the hours worked.
Hourly wage labour: What does the contractor have to document?
When invoicing on an hourly wage basis, the contractor has a relatively low economic risk. However, with this variant, he can expect a higher level of effort in terms of documentation. This is because when invoicing on an hourly basis, the contractor must List working hours, in order to be able to prove this to the client at a later date.
With regard to the question of how exactly the contractor must document his hourly wage work, one can be guided by a judgement of the Federal Court of Justice from 2023 (BGH, decision of 01.02.2023, ref. VII ZR 882/21). The BGH has relaxed the obligation for contractors to provide evidence for hourly paid work.
According to the judgement, in the case of hourly-paid work, the contractor must (only) state how many hours have been incurred for the provision of the contractual services and what hourly rates he charges for the hours incurred.
On the other hand, it is generally not necessary for the contractor to allocate the invoiced working hours to the individual activities in order to provide evidence to the client. He also does not necessarily have to break down the hours worked into time segments. A detailed breakdown of the hours worked and the allocation of the hours to the individual tasks only needs to be provided if this has been expressly agreed by the contracting parties.
Please note: Pursuant to Section 15 (3) VOB/B, further obligations to provide evidence apply to hourly-paid work in connection with the execution of construction work.
What applies if no remuneration has been agreed?
A contract for work is generally valid even if there is no agreement on remuneration. In such a case, Section 632 (1) BGB is applicable. According to this, remuneration is deemed to have been tacitly agreed if, under the circumstances, the work can only be expected to be produced in return for remuneration. If the amount of the remuneration has not been specified, the „usual remuneration“ shall be deemed to have been agreed in accordance with Section 632 (2) BGB.
Tip: When concluding a contract for work and labour, contractors and clients should agree on the remuneration as clearly as possible. In this way, they can prevent disputes about what the usual remuneration for a work service is.
In its judgement, the BGH has relaxed the obligation for contractors to provide evidence for hourly paid work. Nonetheless, documentation that goes beyond what is required by case law can do no harm. In general, a contract for work and labour should contain as precise an agreement on remuneration as possible. This allows you to avoid disputes with an uncertain outcome right from the start.
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Frequently asked questions about work contract invoicing
In the construction industry and for clearly definable services, the lump sum price is the most common, as it offers planning security for both parties. For work that is difficult to predict, the hourly rate is often chosen, while the unit price is used for more extensive projects.
According to the BGH ruling of 1 February 2023 (case no. VII ZR 882/21), it is sufficient to state the total hours and the hourly rate. An allocation to individual activities is only required if this has been contractually agreed. In the case of construction services, stricter obligations to provide evidence apply in accordance with VOB/B.
If no remuneration has been agreed, it shall be deemed to have been tacitly agreed in accordance with Section 632 (1) BGB if remuneration was to be expected under the circumstances. The amount is then based on the „usual remuneration“ in accordance with Section 632 (2) BGB. To avoid disputes, the remuneration should always be agreed in writing.
No - the VOB/B only applies if it has been expressly agreed in the contract. Without this agreement, the general provisions of the BGB law on contracts for work and labour (§§ 631 ff. BGB) apply. In the construction industry, the inclusion of the VOB/B is recommended, as it is specifically tailored to construction work.
In the case of foreign subcontractors, cross-border aspects must be taken into account in addition to the contract design: the applicable law, the A1 certificate for posted workers and compliance with the German minimum wage. Global Business Recruiting provides you with comprehensive support.
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