In this section:
- Options in the event of non-payment
- Suspension of work
- Adjudication
- Court
- How to get it right next time
- Include calendar dates in your contract
- Don't accept conditions precedent to payment
- Check whether the OGC Fair Payment Charter applies
- Pay and get paid by BACS
- Include essential information on your applications for payment
- Adopt NSCC's Top 10 Tips for Getting Paid on Time
- Reduced or under payment
- Proposed price reductions
- Variation payment procedures
- Outstanding retention
- Non-compliance with OGC Fair Payment Charter
- Guidance and support
Late or non payment
Date for payment has passed
If you are certain that the final date for payment has passed and you have not received payment and no withholding notice has been issued, send letter 1a - Overdue application to the contractor informing him that your application is overdue and requesting payment immediately.
If you think you know the date for payment but are unsure, it is still worth writing to the contractor as it is likely to start a discussion about what the correct dates are. If you aren’t certain or have no idea whether the due date and/or final date for payment have passed, send letter 1b - Payment dates unknown to the contractor.
Letter
1a - Overdue application
Letter
1b - Payment dates unknown
Next steps
Contractor says payment not overdue
If the contractor responds that your application is not overdue and sends you details of what he considers to be the due and final dates for payment, you can either accept or dispute them based on your contract. If you choose to dispute them, you have a number of options.
Contractor doesn't respond
If he doesn’t respond with alternative dates and you still can’t work out the final date for payment from your contract, you should seek payment in accordance with the Scheme for Construction Contracts. If the works under the contract last for more than 45 days, the following timetable will apply to payments:
If the works under the contract last for less than 45 days, the following timetable will apply:
If you receive no response at all and payment is still not forthcoming, you should check your contract for any conditions precedent to payment. A ‘condition precedent’ to payment such as the contract or other documents being signed may mean that no payment has to be made to you until the condition has been met and the contract and other documents signed and returned to the contractor.
Options in the event of non-payment
If payment is not forthcoming in spite of all your efforts, there are a number of options you can consider, advice on all of which can be obtained from the NSCC legal and contractual helpline on 0844 249 9871 (0844 249 9872 in Scotland).
Suspension of work
If you are certain that the final date for payment has passed and no notice of intention to withhold payment has been issued, you can issue notice of your intention to suspend work until payment is received. You are normally required to give 7 days’ notice unless your contract specifies a longer period. Before suspending work, you must make sure that you are within your rights to do so as wrongful suspension will almost certainly amount to a breach of contract on your part – for advice on suspension, NSCC Specialist Contractors can contact the NSCC legal and contractual helpline on 0844 249 9871 (0844 249 9872 in Scotland).
Adjudication
Once you have exhausted negotiations, you can go to adjudication to obtain what you are owed by referring the dispute to the adjudicator or Adjudicator Nominating Body (ANB) named in your contract. If your contract does not name an adjudicator or ANB, you can approach NSCC’s ANB, AICA, and NSCC Specialist Contractors will receive a free adjudicator nomination – for further information, contact AICA on 0844 249 5353 or visit www.aica-adjudication.co.uk.
To maximise your chances of success, download NSCC’s Top 10 Tips for Adjudication.
NSCC also offers a Notice of Adjudication template which you can use when referring your dispute to adjudication.
Court
You can use the Small Claims Court to recover debts under £5,000 and the County Court for debts up to £150,000 – for further information, visit www.hmcourts-service.gov.uk.
Please note that the Small Claims Court in Scotland can only be used for debts up to £3,000 and there is no County Court procedure – see www.scotcourts.gov.uk.
How to get it right next time
1. Include calendar dates in your contract
By making sure that, for every payment, the key dates in the payment process are calendar dates recorded in your contract in the form of a schedule such as the one below, you can greatly improve your chances of getting paid on time – or at least your ability to do something about it if you aren’t!
The key dates are:
- Application date – the date by which you are required to issue your application to the contractor
- Due date – the date from which you start counting the agreed number of days to the final date for payment
- Final date for payment – the latest date by which you should actually receive your money.
| Schedule of Interim Valuations/Payment Time Scales | |||||
| Valuation No. | Sub-contractor’s application date | Value up to and including date | Due date | Notice date to sub-contractor* (latest) | Final date for payment to sub-contractor (latest) |
| 1 | Fri 24 Aug 2007 | Fri 31 Aug 2007 | Fri 31 Aug 2007 | Wed 5 Sep 2007 | Sun 30 Sep 2007 |
| etc. | |||||
| Sub-contractor’s application date denotes date by which the sub-contractor application must be received at the site office marked for the attention of the Project QS. | |||||
There should also be a clause in your contract which states that, in the event that your works go beyond the agreed dates in the schedule, you will continue to be paid:
If the sub-contract works continue beyond <insert date> the above dates shall be deemed to continue on a monthly basis to the nearest working day.
If your contract doesn’t contain a schedule like this, it must, by law, contain the due date and the period from the due date to the final date for payment. If there is not enough information within your contract to allow you to complete a schedule like the one above, you should insist on being provided with it. Remember: payment terms which are uncertain only benefit one party to the contract – and it isn’t you!
Finally, always check the length of the period from when you submit your application to when you actually get paid and make sure you challenge if it is unreasonable.
2. Don’t accept conditions precedent to payment
Always check the contract documentation for conditions precedent to payment. You should avoid clauses such as the one below which state that you cannot be paid until the contract or other documents have been signed because the contractor will be able to avoid paying you until the conditions have been met. If you do accept conditions precedent to payment, insist that the contract or other documents are agreed and signed before you start work on site.
It is a condition precedent to any payment by the Contractor becoming due under this Sub-Contract that the Sub-Contractor shall execute as a deed(s) a warranty/ performance bond/ parent company guarantee.
3. Check whether the OGC Fair Payment Charter applies
From 1 January 2008, all clients in the public sector in England and Wales are expected to comply with the requirements of the Office of Government Commerce (OGC) Fair Payment Charter on their projects. The Charter, which applies throughout the supply chain, provides for 30-day payment periods and payment by BACS. If you are working on a project funded by central or local Government such as a hospital or a school, check the payment provisions in the contract documentation during pre-contract negotiations to make sure they comply with the Fair Payment Charter.
Please note that the Fair Payment Charter does not apply in Scotland.
Find out whether it applies to one of your projects by submitting an NSCC enquiry form.
4. Pay and get paid by BACS
By switching to BACS for making and receiving payments, which is easier and more reliable and secure than cheques, you can do away with the excuse that ‘The cheque is in the post’ forever! Send letter 1c - Requesting payment by BACS to your clients giving them your bank details and requesting them to pay you via BACS, and letter 1d - Notifying of payment by BACS to your suppliers asking for their bank details and informing them that you will be paying them by BACS in future.
If you are working on any public sector projects, you may wish to make reference in the letter to your clients to the OGC Fair Payment Charter, which requires payment by BACS throughout the supply chain.
Letter
1c - Requesting payment by BACS
Letter
1d - Notifying of payment by BACS
5. Include essential information on your applications for payment
To facilitate prompt payment, include as standard your bank account details, credit terms and right to charge interest on late payment on the front of your applications and invoices:
|
We would prefer to be paid by BACS Bank: Sort code: Account no.: |
30 DAY PAYMENT TERMS We will exercise our statutory right to claim interest under the contract / Late Payment of Commercial Debts (Interest) Act (currently at 8% over the Bank of England base rate)* if we are not paid according to our agreed credit terms. * delete as appropriate |
It may also be useful to include your Unique Tax Reference (UTR), VAT registration number and any other information that you are routinely asked for by the contractors that you work for.
Once you have got all the information on your applications, make sure you always submit them on time – and get proof that the contractor has received them.
6. Adopt NSCC’s Top 10 Tips for Getting Paid on Time
For further tips on how to improve your chances of getting paid on time, download NSCC’s Top 10 Tips for Getting Paid on Time.