It’s hard to believe that in 2025, late payments, under-valuations, unjustified deductions, and unpaid retentions, were resulting in billions of pounds of subcontractors' hard earned cash sitting in the bank accounts of unscrupulous main contractors.
In reality, Main Contractors will always use their dominant position to withhold your cash and only you can do something about it.
We have won over 1,000 adjudications for subcontractors, and we are happy to explain how to get paid on time and in full.
Top tips to getting paid on time–everything you need to know
The first steps towards full and timely payment
The key is to always submit an honest and factual application for payment on time and in accordance with the contract, with the best supporting documentation available.
Typically, it is the lack of supporting evidence submitted with subcontractors’ applications for payment that ‘motivates’ main contractors to ask for further substantiation, while they under-value the account, coupled with unjustified ‘contra charges’ or deductions that are not adequately challenged by subcontractors.
If you receive a valid Payment Notice (PN) or Pay Less Notice (PLN) that differs from your application for payment then always challenge it in writing and record where the valuations differ, stating where and why the main contractor has made mistakes.
If the main contractor does not pay either the full application on time or the reduced valuation as notified, then the Construction Act allows subcontractors to swiftly proceed to Adjudication and / or a suspension of the work.
Trigger Point
Continue to submit applications for payment on time and in accordance with the contract, substantiated as fully as possible and continue to challenge deductions and differences in valuations.
It is vital that the contract position is checked by a construction lawyer and the supporting documentation is checked and brought up to ‘tribunal standards’ properly
during this time, i.e., the standard necessary to convince a tribunal that your claims are correct.
Continue to record all commercial differences and commercial meetings where the differences are discussed. As the amount withheld increases, the meetings will usually be escalated from the project teams through middle management to director level.
When the amount withheld is significant enough and the quality of the evidence substantiating the claims is good enough, then effective action should be taken.
The most efficient and effective way for subcontractors to resolve disputes that cannot be settled amicably within a reasonable timeframe is to refer the matter to adjudication in accordance with the contract and / or the Construction Act. Adjudication is fast, straightforward, cost-effective and private.
Always seek professional advice on contracts and adjudication from a qualified construction lawyer (we have several) prior to commencing adjudication, in fact the earlier the contractual positions are confirmed by a construction lawyer, the better it will be for dispute avoidance, negotiation, settlement or dispute resolution by tribunal.
Too many subcontractors leave it too late and end up with complicated final account disputes that could have been avoided or resolved long before the final account.
Common Sense Does Not Prevail
So far, this may all sound like common sense, but there are thousands of projects in the UK not addressing these issues properly. Why? Because the devil is in the detail, and most people are too busy to gather and present claims to meet exacting tribunal standards. If this sounds all too familiar, you’ll be relieved to know that we can review the subcontract account to ensure your application for payment succeeds.
Whatever type of specialist subcontractor you are, your subcontract account can be broken down into three parts, as explained below.
The Subcontract Account:
1. Original Subcontract Sum
2. Variation Account (incl. delays)
3. Main Contractor Deductions
Original Subcontract Sum
This is the sum agreed in the contract for the original scope of work and is often called the Contract Works. It will include line items for all design, procurement, installation, testing and commissioning and all associated site costs, usually called preliminaries or prelims. Overhead and profit is usually included within each line item.
The subcontractor gets paid on an interim basis for the work executed to date, which can be verified by observation, and typically calculated as the percentage completed.
This is normally the most straightforward part of the account, although there can be disagreements over the percentage completed by a certain date, and some items are challenged as not complete or deemed to be done by others, however, these disagreements are all fact based and are therefore resolved by factual evidence, so good record keeping is vitally important (diaries, photos, progress, emails, notices).
Main Contractor Discount (MCD) has been removed from many standard forms of contract but remains in some bespoke contracts. It used to be used to motivate prompt payment, but then Main Contractors saw it as a sort of management fee for themselves. We have recovered MCD for subcontractors paid late and also in a few cases where it had been applied twice.
Retention clauses are under industry wide review and could be subject to reform, but if you have an agreed retention clause in your contract then it has to be complied with and is often a matter of disagreement regarding the making good of defects. Our advice is to remove the Retention Clause entirely or at least limit your liability.
Remember, the Prompt Payment Code (PPC) has been broken by most major Main Contractors (widely reported in the construction media) and should not be relied upon for prompt payment.
Variation Account
The variation account is a hot bed for disagreement, under-valuation and disputes. It often ends up between 10% and 30% of the original subcontract sum, but we have had severe cases where the variation account exceeds the original subcontract sum, with hundreds of line items, and we have successfully fought and won the true value.
Change is inevitable on most projects, especially the more complicated ones and it is the root cause of most commercial issues. It is only reasonable to be compensated for change, on time and in full, but the variation account always requires hard work in order to get paid its true value. Main Contractors are not push overs and never will be.
The contract will define what constitutes Variations (JCT) or Compensation Events (NEC) and will determine how to deal with them. However, they are not always instructed clearly, in writing, or issued as formal instructions. They may be verbal or ambiguously written instructions. Always clarify the scope, specification, cost and time impact in writing and confirm any updates in writing as soon as they arise.
Always identify the contractual notice provisions and comply. If the contract has any conditions precedent then you must issue notices ‘on time’ or risk being ‘time barred’ from compensation. We can advise further on this for all JCT and NEC subcontracts.
Variations are not always issued as instructions. They may be caused by impediments or acts of prevention. The most common change event encountered with the highest impact to subcontractors will be the effects of delay events.
Delays are encountered on most projects, due to the nature and risk of construction and the uniqueness and complexity of each project. Delay events can be caused by labour, materials, equipment, design, weather, third parties or regulations.
Labour and material shortages are currently causing huge cost increases and delays on most sites in the UK, which can only be addressed in accordance with the contract. Due to the consequences of the pandemic, the Courts have dealt with a whole new body of case law regarding labour and material shortages. Our lawyers and legally qualified surveyors are happy to advise you where necessary.
The contract terms will determine how to deal with delays, extensions of time (EOT), loss and expense, CENs and actual damages or liquidated damages (LDs).
The most common cause of delay to most subcontractors is from preceding trades, i.e., the knock-on effect from other subcontractors’ activities, this is followed by design changes and then scope changes.
Successful delay claims start off with awareness of the delay event followed by keeping detailed records of all observable facts, such as the root cause and the impact or effect, e.g., a preceding activity’s completion is delayed, preventing subsequent activities from starting or resuming.
Fact based delay claims are always more successful than theoretical ones. Make sure to keep detailed daily records of your actual progress on site so that a factual as-built programme can be developed. Record all delay events and durations, i.e., when was the activity stopped or prevented from starting and when it was able to start or resume.
JCT and NEC have different terms for recovering delay costs. JCT Relevant Matters cover loss and / or expense claims, whereas NEC Compensation Events cover such costs. Prolongation costs cover extended site costs (prelims) during delay periods, but there could also be thickening of site costs to consider due to variations and delays. Recovery of head office overheads and other indirect costs depends upon the contract terms and would need to be assessed by a construction lawyer.
Delays can be simple or complicated and they can be relatively easy or relatively difficult to prove. Fact based delay analysis using an as-built programme or an as-built ‘mini’ programme for the activities involved and then inserting the actual delay events into the as-built activities, is the preferred method as it can all be explained by using factual evidence and a bar chart visualisation of the facts with a compelling narrative.
Main Contractor Deductions
Main Contractors regularly make significant deductions to subcontractor’s accounts, which they often call contra-charges. We have seen some very large and unjustified
deductions made, including hundreds of items often ‘equalling’ the variation account and sometimes greater, and we have successfully fought against them many times.
Some deductions are legitimate where the Main Contractor has provided something that the subcontractor actually required. But Main Contractors also make spurious, unjustified and exaggerated deductions to set-off against subcontract claims for variations and delays.
Delay damages can be calculated and agreed up front in the contract as liquidated damages (LDs or LADs) or if not then actual damages may be claimed, but actual damages always have to prove the actual costs and the delay, whereas liquidated damages claims have to prove the delay but not the costs. Far too often, we see Main Contractors deducting LDs without any evidence or delay analysis substantiating cause and effect.
We often find with deductions, variations and delays, that we are brought in late and that we could have saved more costs and time if we had been brought in sooner. So never delay to seek professional advice. It could cost you thousands.
I hope you found this article useful, but always remember that if you are struggling to get paid on time and in full, we offer a free consultation or risk assessment of any subcontract. We specialise in supporting subcontractors and have highly experienced team of construction lawyers, quantum and delay experts on hand ready to help.
Top tips to getting paid on time–everything you need to know
About the author:
Peter English LLM LLB (Hons) M.Sc FRICS FCIArb is the founder of construction dispute resolution experts, PJE International, specialising in helping construction subcontractors get paid in full and on time by legally challenging unethical main contractor behaviour, enforcing the provisions of the Construction Act, and ensuring every contract is fair, equitable and enforceable. Peter is a respected construction industry figure. He is an Adjudicator, Arbitrator, Author and lecturer on adjudication, arbitration, and contract law.
Tel: 0116 259 7627
Direct: 07939 136857
WWW.PJEINTERNATIONAL.CO.UK
