Agree Clear Payment Terms in your Contract

To ensure you get paid on time, it is essential to agree clear payment terms in your contract.

Identify the Key Payment Dates

There are 5 dates in the payment process that you must know and they should ideally be written into the contract as a schedule of calendar dates:

  1. Application (Valuation) Date
  2. Due Date
  3. Date for Payment Notice
  4. Date for Pay Less Notice
  5. Final Date for Payment

Click here for a model schedule for 30-day payment >

The Due Date should always be a calendar date – never agree to the Due Date being an 'event' such as the issuing of a certificate under the main contract which is illegal under the Construction Act.

Use a Standard Form

The easiest way of ensuring you have clear payment terms is to use a standard form of contract such as JCT. If the standard terms have been amended, always read them very carefully, as it is unlikely they have been changed for your benefit!

Fall back on the Scheme

If you don’t agree terms that meet the requirements of the Construction Act, the Scheme for Construction Contracts applies. This is a formal payment framework, which provides for instalments at 28 day intervals for contracts lasting more than 45 days. However, it only applies where there is no agreement or the agreed terms do not satisfy the Construction Act – you cannot revert to it because you decide you don’t like the terms you have signed up to!

Model schedule for 30-day payment

 

Valuation No. Sub-Contractor's Application Date Value up to and including date Due date Payment Notice Date to Sub-Contractor (latest) Pay Less Notice to Sub-Contractor (latest) Final Date for Payment to Sub-Contractor (latest)
1 Fri 24 Aug 2012 Fri 31 Aug 2012 Fri 31 Aug 2012 Wed 5 Sep 2012 Sun 23 Sep 2012 Sun 30 Sep2012
etc.            
Notes The date you must ask for your money. It should not be more than 7 days before the Due Date. The date you value your works to. It may be projected for a few days after the Application Date. The starting point for all calculations relating to dates in the payment process. The first one should not be more than 30 days from the date you start work and intervals should be no more than monthly. This is always 5 days after the Due Date. This can be the day before the Final Date for Payment but you should try to get it 7 days before if you can. This is the date you should actually receive your money.

 

Sub-contractor’s application date denotes the date by which the sub-contractor application must be received at the site office marked for the attention of the Project QS.