A large majority of subcontractors do not receive pay less notices when payment is withheld, according to a recent survey conducted by construction law specialists PJE International.
The study, which was intended to gauge the impact of current payment practices on the UK construction industry, found that of the 75% of subcontractors affected, only 36% had received notices on fewer than 10% of cases where payment was withheld. Furthermore, almost 14% had never received a pay less notice when they should have.
Peter English, managing director of PJE International Ltd said:
“Under The Construction Act, main contractors are required by law to issue subcontractors with a pay less notice if they do not want to pay the subcontractor in full. What’s more, in order to be valid, this notice must be issued within a specified time frame, set out detailed reasons as to why the amounts are being withheld and then clearly show the basis of all calculations used.
“If the main contractor doesn’t comply with this, or if they fail to send out a pay less notice at all, the subcontractor is put in a very strong position to recover whatever amount is disputed.”
However, the PJE International 2014 Payment Survey also found that even when subcontractors do receive a pay less notice, many are unsure of how to challenge them. While the majority of respondents had some knowledge of when they could dispute the notice, 30% said they were ?not sure’ of their rights at all.
Other respondents clearly felt they had no real power in these situations, with one subcontractor stating that main contractors just threaten longer delays in payment unless they accept reduced amounts. They went on to say
“they’ll tie you up in lies and allegations if you do not play their game.”
Mr. English said:
“We really need to raise awareness of subcontractors’ rights in these situations, because there are clearly a lot of firms out there that don’t realise they have a strong case for recovering unfairly withheld payments. Not only is this bad news for their individual businesses, it also impacts the growth and success of the UK construction sector as a whole.”
He added the key message is that subcontractors can win in these situations, citing a recent case taken against Southampton FC, which had ?unfairly’ withheld payments to a PJE International client.