No, in most cases. Pay when paid is ineffective under section 113 of the 1996 Housing Grants, Construction and Regeneration Act (the Construction Act), unless the upstream payer is insolvent, so "the Client hasn't paid us" isn't a valid reason for a main contractor to withhold.
What decides it in your case is whether the Act applies to your contract, whether insolvency is involved, and whether a valid pay less notice was served. This is general guidance, and part of our NEC questions answered.
If you are unpaid: what to do now
- Find the dates. Under the Engineering and Construction Subcontract with Option Y(UK)2, a payment is due 14 days after the assessment date, with the final date 14 days after that, unless the Subcontract Data says otherwise. Look at your own form if it's different.
- Check for a pay less notice. It has to arrive no later than seven days before the final date, and state the amount and how it was worked out (Y2.3). See pay less notices.
- Write as soon as the final date passes. Ask for payment and say that interest is running. NEC's core clause 51.2 makes late payment carry interest.
- Consider adjudication. Under the Act you can refer a dispute at any time. See adjudication under NEC.
- Consider suspending. Section 112 requires at least seven days' written notice stating your grounds, and the right ends when the sum is paid in full. A wrongful suspension can be costly, so get advice first.
What decides the answer
| Situation | Position |
|---|---|
| A subcontract says payment follows receipt from the Client, and the Client is solvent but slow | That term is ineffective under section 113 |
| The Client, or someone further up the chain whose payment is a condition, is insolvent | Section 113 allows the condition, if the contract has one. Read the clause and take advice |
| No conditional clause at all: the main contractor is simply short of cash | The sum stays due. Lack of funds isn't a pay less ground |
| A valid pay less notice covers an amount you dispute | The issue is now the amount, not pay when paid. Adjudication is the route |
| The contract is outside the Act, for example work on a residential occupier's home, or outside England, Wales and Scotland | Different rules may apply. Northern Ireland has its own legislation, so take advice |
Where section 113 knocks out a clause, the parties can agree other terms. If they don't, the Scheme for Construction Contracts fills the gap.
How it looks in an NEC subcontract
The contract says the NEC4 subcontract sets its own timetable: the Contractor certifies within two weeks of each assessment date and pays within four weeks of it, unless a different period is stated. Nothing in those core clauses links the payment to what the Client has paid (see subcontractor payment). A pay-when-paid clause would be a Z clause, so check those.
In practice, main contractors often line up subcontract and main contract dates, so money comes in around the time it goes out. That is sensible cash management, and lawful, as long as it doesn't become a condition. Our guide to back-to-back subcontracts explains how to align periods without trying to pass the payment risk down.
A fictional example
An M&E subcontractor on the ECS with Y(UK)2, with illustrative dates. The assessment date is 1 March, so payment is due on 15 March and the final date is 29 March. No pay less notice arrives by 22 March. On 2 April, the main contractor emails: "We'll release your £48,000 when the Client pays us."
The subcontractor replies the same day, as below. It then has a clear position: a notified sum, a final date passed and no valid notice. It can adjudicate, or give seven days' notice of suspension. If it properly suspends, Option Y(UK)2 makes the effect a compensation event (Y2.4 in the NEC4 ECS, Y2.5 in the NEC4 ECC, Y2.4 in NEC3).
Sample wording
What the main contractor is likely to say
- "It's in your order." A term in the order doesn't get around the Act. Ask which clause they rely on.
- "The Client has rejected your work." Then ask for a pay less notice, in time, showing the amount. A problem upstream doesn't replace the notice.
- "The Client has gone under." Ask for evidence of the insolvency, and take advice at once, as this is the one exception and your position may change quickly.
Related guides
- NEC Questions Answered: Real Situations on Site
- We Disagree With the Final Assessment
- The Project Has Finished but Compensation Events Are Still Open
- The PM Refused to Accept Our Design: What Now?
- Does PM Acceptance Remove Our Design Responsibility?
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This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.