What is Supply Chain Liability?

Supply chain liability means that hiring a subcontractor does not transfer all legal risk to that subcontractor. When a subcontractor fails to pay wages, social contributions, or taxes, the principal can be held liable for those debts. The rationale is straightforward: principals benefit from cheaper subcontracted labour and should bear some responsibility for ensuring that labour is paid fairly and legally.

In the Netherlands, the Wet ketenaansprakelijkheid (Chain Liability Act) applies primarily to construction, cleaning, staffing, and other labour-intensive sectors. The principal is jointly liable for the wage and tax obligations of every party in the subcontracting chain, not just the direct contractor. This liability extends down as many levels as the chain goes.

The risk for SMBs is significant. If you hire a contractor who subcontracts part of the work to a company that later goes bankrupt without paying its workers, you may receive a claim for those unpaid wages. The fact that you had no direct relationship with the failing subcontractor does not protect you.

Mitigation is possible but requires active management. The most common approach is to use a G-account (geblokkeerde rekening), where a portion of each payment is set aside in a blocked account that can only be used for wages and taxes. Alternatively, you can request a chain liability declaration (verklaring ketenaansprakelijkheid) from the tax authority, which confirms that the subcontractor has no outstanding debts.

Without these safeguards, the principal carries financial risk for every link in the chain.

Many businesses assume that outsourcing work also outsources all related risk. Supply chain liability proves otherwise. Research from Loio (2026) found that 71% of contracts are never monitored for compliance after signing. In a subcontracting context, that means most principals have no visibility into whether their contractors are meeting wage and tax obligations. By the time a problem surfaces, the financial damage is already done. Active contract monitoring and proper use of G-accounts are the most effective defences.