This guide is a general overview for England and Wales, not legal advice. Contract terms vary and the detail matters, so take advice from a construction solicitor on any specific dispute.
Which law applies
The Housing Grants, Construction and Regeneration Act 1996, usually called the Construction Act, sets minimum payment rules for construction contracts. Its payment provisions were substantially amended by the Local Democracy, Economic Development and Construction Act 2009, and the amended rules apply to contracts entered into from 1 October 2011 in England and Wales.
The Act covers most construction contracts, including subcontracts for mechanical and electrical installation. There are exclusions, most notably contracts with a residential occupier for work on their own home.
The right to interim payments
Where work is expected to last 45 days or more, a party carrying out construction operations is entitled to payment by instalments, stage payments or other periodic payments. The contract should set out how much each payment is and when it is due. Most subcontracts do this through monthly applications or valuations.
The key dates
Every payment under a construction contract revolves around two dates that the contract must provide for:
- The due date: the date on which a payment becomes due. This is often linked to a valuation date or the receipt of an application.
- The final date for payment: the last date by which the payment must be made. The period between the due date and the final date is set by the contract.
Around those two dates sit the notices that decide how much must be paid.
The payment timeline at a glance
In order, a typical payment cycle runs like this:
| Step | Who | When |
|---|---|---|
| Application (or valuation) | Subcontractor | By the date in the subcontract |
| Due date | Set by the contract | Often a set number of days after the valuation date or the application |
| Payment notice | Payer | No later than 5 days after the due date |
| Pay less notice | Payer, if paying less than the notified sum | No later than the period before the final date that the contract sets |
| Final date for payment | Payer must pay | The period after the due date that the contract sets |
For example, with a valuation on Friday 30 October 2026, a due date 7 days later, a final date 21 days after that and pay less notices due 7 days before the final date, the due date is Friday 6 November, the payment notice is due by Wednesday 11 November, the pay less notice by Friday 20 November and payment by Friday 27 November. Put your own terms into our free payment date calculator to see your dates.
The payment notice
The paying party, or a person named in the contract such as the main contractor's QS, must give a payment notice no later than five days after the payment due date. It must state the sum the payer considers due and the basis on which that sum is calculated. The sum stated becomes the notified sum.
Some contracts instead require the subcontractor to give a notice, such as an application, stating the sum it considers due. In that arrangement, the subcontractor's notice sets the notified sum.
If no payment notice is given
What happens next depends on how the contract is drafted:
- Where the contract provides for payment to be made following an application, and the subcontractor applied on or before the date the payment notice was due, the application is treated as a payee's notice given on that date. The sum applied for becomes the notified sum without anything further being sent.
- Otherwise, the subcontractor can give its own notice, known as a payee's notice in default, stating the sum it considers due and how it is calculated. The final date for payment is then pushed back by the same number of days as the delay between when the payment notice should have been given and when the payee's notice was given.
This is one of the most commonly misunderstood parts of the process, and one of the places where recording the exact dates matters most.
The pay less notice
If the payer intends to pay less than the notified sum, it must give a pay less notice. The notice must state the sum the payer considers due at the time it is given and the basis on which that sum is calculated. It must be given no later than the period before the final date for payment that the contract specifies.
If no valid pay less notice is given in time, the payer must pay the notified sum by the final date. Our guide to payment notices and pay less notices covers the difference between the two and the common mistakes. A pay less notice that arrives late, or that gives no basis for the sum stated, may not be effective, although whether a particular notice is valid is a question for legal advice.
When the contract is silent: the Scheme
If a contract does not include adequate payment provisions, the relevant parts of the Scheme for Construction Contracts fill the gap. Under the Scheme, in outline:
| Step | Scheme position |
|---|---|
| Due date | The later of 7 days after the end of the relevant period, or the making of a claim |
| Payment notice | No later than 5 days after the due date |
| Final date for payment | 17 days after the due date |
| Pay less notice | No later than 7 days before the final date |
Most standard form subcontracts set their own periods, which can differ from the Scheme, so always check the contract itself.
Counting the days
When the Act refers to a period of days, Christmas Day, Good Friday and bank holidays are disregarded. A deadline that looks straightforward on a calendar can move by several days over Easter or Christmas, which is exactly when payment disputes tend to arise.
If you are not paid
The right to suspend
If the notified sum is not paid in full by the final date, and no effective pay less notice has been given, the subcontractor has a statutory right to suspend performance of some or all of its obligations. At least seven days' written notice of the intention to suspend must be given, stating the grounds. A subcontractor that suspends properly is entitled to a reasonable amount for the costs and expenses of suspending and resuming, and to an extension of time for the period of suspension.
Adjudication
Any party to a construction contract has the right to refer a dispute to adjudication at any time. Adjudication is a fast process, typically concluded within 28 days of referral, and the decision is binding unless and until it is overturned by the court or by agreement.
Pay when paid
Clauses that make payment conditional on the payer itself being paid are generally ineffective under the Act, except where a third party higher up the chain is insolvent.
Practical steps for subcontractors
- Read the payment terms of every subcontract before the first application, and write down the actual periods rather than assuming they match another job.
- Submit every application on time, to the right person and address, in the way the contract requires. Our payment application checklist covers what to include.
- Keep evidence of when and how every application was sent.
- Record the date every payment notice and pay less notice arrives, and check it against the deadline.
- If a notice is missing or late, act quickly and take advice. The options narrow as time passes.
Constructicore Payments was built to do this tracking for you. It calculates every date from your contract terms, alerts you when notices are late or missing, and keeps the evidence. See how Construction Act compliance works.
Published 2 October 2026, updated 9 October 2026.