Payment for NEC Subcontractors

NEC subcontract payment follows the same pattern as the main contract, with longer periods. Under the Engineering and Construction Subcontract (ECS), the Contractor certifies within two weeks of each assessment date, and payment follows within four weeks, unless the Subcontract Data states another period.

The periods are the same in the NEC3 and NEC4 ECS, while the short subcontract uses a different system. See the ECS guide for the form and the NEC payment and Defined Cost guide for how payment works generally.

Subcontract and main contract side by side

Step	ECC	ECS
Who assesses and certifies	Project Manager	Contractor
Who applies (NEC4)	Contractor, before the assessment date	Subcontractor, before the assessment date
Certificate	Within 1 week of the assessment date	Within 2 weeks
Payment	Within 3 weeks	Within 4 weeks
Y2.2 due date	7 days after the assessment date	14 days after
Y2.2 final date	14 days after the due date	14 days after the due date
Y2.3 pay less notice	7 days before the final date	7 days before the final date

The rule for a missed application is at 50.4 in both forms. So a Subcontractor who applies late can't increase its amount due, as the applications guide explains from the main contract angle.

Lining up the dates

The Contractor chooses the first subcontract assessment date to suit the Parties' procedures. A sensible approach: set the subcontract date a few days before the main contract date, so subcontract figures feed the upward application. Illustrative example, with day 0 as the main contract's assessment date:

Day	Event
Day minus 8	Subcontractor's application
Day minus 7	Subcontract assessment date
Day minus 1	Contractor applies upward
Day 0	Main contract assessment date
Day 7	Both certificates issued. That's the main certificate's week, and the subcontract's two weeks
Day 21	Client's final date, and the subcontract's four-week date

In this arrangement the Contractor receives and pays around the same day. If the dates sit the other way around, the Contractor may have cash in hand before paying or may have to fund a gap, so it's worth thinking this through by package.

Fair payment points

• Pay when paid. The Construction Act generally prevents a contract from making payment conditional on being paid by someone else, with a narrow exception for upstream insolvency. So a Contractor can't normally withhold because the Client hasn't paid, unless a valid pay less notice applies for another reason.
• Public work. Public sector procurement rules and many Clients' Scope or Z clauses set shorter periods along the supply chain, often 30 days. Check both your own subcontract and what the main contract requires you to pass down.
• Project bank accounts. Option Y(UK)1 lets named suppliers be paid directly from a project account.
• Altered periods. A Subcontract Data period can be set longer than the printed period. Read it before tender and compare it with the cash flow you've assumed.

Retention and deductions

Option X16 in the ECS mirrors the main contract, with its own free amount and percentage. On a cost main contract, what the Contractor retains from a Subcontractor shouldn't reduce the cost passed upward, as explained in Subcontractors and Defined Cost. Under the NEC4 subcontract, a retention bond can be offered instead, if the data states it or the Contractor agrees.

Worked example: a late subcontract payment

A fictional NEC4 ECS, with illustrative figures and interest of 6% a year in the Subcontract Data. Certified: £50,000. The final date passes and payment arrives 30 days late, with no pay less notice given.

• Interest: £50,000 × 6% × 30 ÷ 365 = about £247, included in the first assessment after the payment.
• Suspension: with Y(UK)2 in place, a Subcontractor who has properly used its statutory right to suspend has a compensation event, so its time and cost can be assessed. Take advice first, as the Act requires notice before suspending.
• Adjudication: the Subcontractor can refer the debt under the subcontract's dispute Option.

What Subcontractors commonly miss

• The Contractor's Subcontract Data can state a period different from four weeks.
• The NEC4 ECS has its own final assessment clause, at 53.1. Dates differ from the main contract, so diarise them separately.
• The application has to follow any form required by the Subcontract Scope.
• A short subcontract works differently. See the short subcontract guide.

Related guides

• NEC Payment and Defined Cost: The Complete Guide
• Retention Under NEC
• Delay Damages
• Auditing Defined Cost
• Common NEC Payment Mistakes

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.