#WiseUpWednesday: Watch Out For Christmas Payment Holidays…
Don’t Become This Year’s Christmas News
Specialist Contractors routinely suffer from both late and reduced payment, and especially so at Christmas, when some Main Contractors think it’s nice to treat themselves to a Christmas payment holiday.
Here’s a typical story from last year (modified accordingly) don’t let this be you;
“Stabard Contractors Ltd withheld payments to subcontractors in December to boost its end-of-year balance sheet.
It is understood the subcontractor was told that payments would be withheld until the New Year, after the close of Stabard’s financial half-year on 31 December.
The subcontractor, working directly for Stabard, is now having to use loans and overdraft facilities to pay its own supply chain.
Don’t Let This Be You…
Do not be the subject of this kind of news story.
The Construction Act, provides 3 great remedies for late or non-payment (Suspension and Adjudication and the threat of either or both).
Unfortunately these remedies are not used as widely as they should be.
One of the main reasons, is that there is a good deal of uncertainty about how much is due for payment and when it should be paid. So you might find our special report on payment useful; “How To Get Paid”
Use The Contract To Get Paid On Time
The Construction Act applies to the vast majority of projects (some are excluded by the Act itself), and the Scheme applies to non-compliant contracts (or to that part of a contract that does not comply), so if it is a “Construction Contract” as defined in the Act then there is no escaping the legislation for those who would seek not to pay you.
To conform to the legislation with regard to stage payments, construction contracts should now provide for the following main stages:
- Payment Due Date – the date each month when a payment becomes due.
- Payment Notice – a notice indicating the amount due on the due date (the ‘notified sum’) and the method of its calculation.
- Final Date for Payment – the date on which payment should be made.
- Payer’s ‘Pay Less’ Notice – if the payer intends to pay less than the amount due, a notice to that effect, together with explanation.
The new provisions require a payment notice and a pay less notice to be given even if the amount which is due is zero. They also require payment notices and pay less notices to be served separately.
Cutting Through The Legal Speak
Don’t assume that Main Contractors always comply with the law or that they are bound to be better at this than you.
Once you get your head around it, it all makes sense, so don’t let the way contracts are drafted put you off, and don’t let them take a payment holiday that they are not entitled to.
It might be getting Christmas but don’t give them a gift that they don’t deserve…
As always, if you need any help interpreting contracts, or help to resolve your payment problems, please don’t hesitate to pick up the phone, take action and give us a call on 01773 712116 or email firstname.lastname@example.org.