Subcontractors: Know Your Rights – Get Paid on Time

Late payments continue to be a significant issue in the UK construction sector, impacting thousands of subcontractors each year. According to a 2024 report by the UK Department for Business and Trade, 31% of construction businesses cite late payments as a major factor affecting cash flow (source: gov.uk). The UK government has introduced stricter measures to enforce compliance with fair payment practices, particularly under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA).

A recent article in The Construction Index noted that delays in payment remain a major cause of insolvency in the industry, with subcontractors disproportionately affected (source: theconstructionindex.co.uk).

Step 1: Understanding Your Legal Rights

The HGCRA provides a statutory framework for fair and timely payments:

• Payment Notices: The payer must issue a Payment Notice within five days of the due date, detailing the amount due and how it was calculated.
• Default Payment Notices: If a Payment Notice is not issued, the subcontractor’s Application for Payment can be deemed a Default Payment Notice, making the amount legally due.
• Pay Less Notices: If the payer intends to pay less than the claimed amount, they must issue a Pay Less Notice at least seven days before the final payment date.
• Failure to Issue Notices: If neither a Payment Notice nor a Pay Less Notice is issued, the subcontractor’s full application amount is legally due.

The Building magazine recently highlighted a case where a contractor was ordered to pay in full due to failure to issue the correct notices, reinforcing the importance of these statutory rights (source: building.co.uk).

Step 2: What to Do If Payment Is Delayed

If your payment is overdue, follow these steps:

• Issue a formal reminder, referencing contractual terms and the HGCRA.
• Request a meeting to escalate the issue before taking legal steps.
• Verify compliance with statutory notice requirements.

The UK government has also introduced a Prompt Payment and Cash Flow Review, aimed at cracking down on persistent late payers (source: gov.uk).

Step 3: Exercising Your Right to Suspend Work Under HGCRA Section 112

If payment is overdue and no valid Pay Less Notice has been issued, subcontractors have a legal right to suspend work.

• Provide at least seven days’ written notice before suspending work.
• Suspension can apply to part or all of the subcontracted work.
• Subcontractors may be entitled to claim compensation for costs incurred due to suspension.

A BBC News investigation found that many subcontractors hesitate to suspend work due to fear of damaging relationships, despite their clear legal rights (source: bbc.co.uk).

Step 4: When to Pursue Debt Recovery

If payment is still outstanding despite multiple attempts to recover it, legal escalation may be required.

The UK government has reinforced statutory adjudication as a preferred method for dispute resolution under the HGCRA. The Construction Leadership Council has also urged public sector bodies to exclude persistently late payers from future government contracts (source: gov.uk).

At Contract Group, we specialise in supporting subcontractors with:

• Mediation and negotiation to preserve working relationships where possible.
• Legal escalation where necessary to ensure payment.
• Support with adjudication and claims to enforce subcontractor rights

For further guidance, subcontractors should refer to UK government resources on construction payment practices and statutory adjudication mechanisms.

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