Cash Flow is King: A Subcontractor's Guide to Getting Paid in Construction

Cash Flow is King: A Subcontractor's Guide to Getting Paid in Irish Construction

As a subcontractor in Ireland's demanding construction and infrastructure sector, you are the specialist backbone of countless projects. Your expertise is crucial, but so is getting paid fairly and on time for the work you deliver. Unfortunately, securing prompt payment can often feel like an uphill battle, putting immense pressure on your cash flow and business stability. Late or disputed payments from main contractors can have serious knock-on effects.

The good news is that Irish law, particularly the Construction Contracts Act 2013 (CCA 2013), provides significant rights and mechanisms specifically designed to protect subcontractor payment in Ireland. Understanding these rights and adopting proactive strategies is essential for ensuring you receive the money you're owed.

This guide provides practical advice for Irish subcontractors on how to maximise your chances of getting paid, navigate payment disputes, and leverage your entitlements under the law.

1. Laying the Groundwork: Before the Work Begins

Securing payment starts long before you submit your first invoice. Taking proactive steps at the outset can prevent many problems later:

• Get it in Writing: Always insist on a clear, written subcontract agreement. Avoid starting work based solely on verbal agreements or vague purchase orders.

• Scrutinise Payment Terms: Before signing, carefully review all payment clauses. Understand:

  • When are applications for payment due (Payment Claim Dates)?

  • What is the payment cycle (e.g., 30 days)? The CCA 2013 sets minimum standards for subcontracts (see below).

  • What information must your payment application contain?

  • What are the terms regarding retention?

  • Are there any onerous conditions precedent to payment?

• Understand "Pay-When-Paid": Be aware that the CCA 2013 generally prohibits "pay-when-paid" clauses (where the main contractor only pays you once they've been paid by the employer). While such clauses might still appear in contracts, they are largely ineffective under the Act, except in specific insolvency situations. Don't let a main contractor rely on an invalid clause to delay your payment.

• Know Your Main Contractor: If possible, research the main contractor's payment reputation or conduct a basic credit check.

2. During the Project: Documentation, Documentation, Documentation!

Your ability to prove entitlement to payment hinges on meticulous record-keeping throughout the project:

• Maintain Detailed Records: Keep accurate, contemporaneous records of everything:

  • Daily site diaries (labour, plant, key events, instructions received).

  • Signed daywork sheets for any instructed additional work outside agreed scope.

  • Copies of all instructions received (especially those changing the scope or causing delay).

  • Progress photographs dated clearly.

  • All relevant correspondence (emails, letters).

• Submit Compliant Payment Claims: Issue your applications for payment (Payment Claim Notices under the CCA 2013) strictly in accordance with the contract and the Act. Ensure they:

  • Are submitted on time (the CCA 2013 default for subcontracts includes claim dates 30 days after commencement, every 30 days thereafter, and 30 days after final completion, unless more favourable terms are agreed).

  • Are delivered correctly (check contract for required method).

  • Contain the required information (amount claimed, period/activity covered, subject matter, basis of calculation – see CCA 2013 Section 4). Use official templates (like Form 1) if helpful.

• Track Variations: Properly document and value all variations to your scope of work. Get instructions in writing where possible and agree costs upfront if feasible.

• Issue Notices Promptly: If you anticipate delays caused by the main contractor or potential claims for loss and expense, issue the required contractual notices immediately.

3. Know Your Rights: The Construction Contracts Act 2013 (CCA 2013)

The CCA 2013 provides crucial protections specifically aimed at improving payment practices for subcontractors:

• Minimum Payment Terms: Your subcontract must provide an adequate mechanism for determining payment amounts and dates. If it doesn't, or if it provides terms less favourable than the schedule to the Act, the Act's default provisions apply (including the 30-day payment cycle mentioned above).

• Right to Timely Response: If a main contractor disputes your Payment Claim Notice, they must respond in writing within 21 days of the payment claim date, specifying the amount they intend to pay and detailed reasons for any difference.Failure to do so weakens their position to withhold payment.

• Prohibition of "Pay-When-Paid": As mentioned, clauses making your payment conditional on the main contractor getting paid by the employer are generally ineffective.Right to Suspend Work: If an amount properly due is not paid by the final date for payment, you have a statutory right to suspend work (CCA 2013, Section 5).You must give the main contractor at least 7 days' written notice of your intention to suspend, specifying the grounds (non-payment).This notice can only be served after the payment due date has passed. Suspension can be a powerful lever but seek advice before taking this step, especially ensuring you haven't received a notice initiating adjudication for that specific payment. The period of a justified suspension is disregarded when calculating your completion time.

• Right to Adjudication: Crucially, you have the right to refer any payment dispute under your subcontract to statutory adjudication at any time (CCA 2013, Section 6).This is arguably the most powerful tool for subcontractors facing non-payment.

4. Chasing Overdue Payments: A Step-by-Step Approach

When payments become overdue:

1. Initial Contact: Make a polite phone call or send an email reminder referencing the specific application/invoice and due date.

2. Formal Reminder: Send a formal letter or email clearly stating the outstanding amount, the due date, referencing the relevant contract clauses and your Payment Claim Notice. Request immediate payment.

3. Letter Before Action: If payment is still not received, issue a formal 'Letter Before Action'. State the exact sum owed, attach supporting documents, give a final deadline (e.g., 7 or 14 days), and clearly state your intention to commence formal proceedings (such as adjudication) if payment is not made. Mention potential entitlement to statutory interest on the late payment.

4. Consider Suspension Notice: If payment remains outstanding after the due date, consider formally issuing your 7-day notice of intention to suspend work under Section 5 of the CCA 2013.

5. Initiate Adjudication: If the above steps fail, initiating adjudication is often the most effective next step for recovering payment quickly.

5. Adjudication: Your Ace Card for Payment Recovery

Statutory adjudication under the CCA 2013 is particularly beneficial for subcontractors:

• Speed: It forces a decision typically within 28-42 days, bypassing lengthy main contractor delays or excuses.

• Focus on Payment: It's specifically designed for payment disputes, making it ideal for recovering certified sums, disputed variations, or final account balances.Cost-Effective: Compared to full court proceedings, it's generally faster and less expensive.High Enforcement Rate: The Irish High Court robustly enforces adjudicators' decisions. Failure by the main contractor to pay an adjudicator's award allows you to seek rapid High Court enforcement, effectively turning the decision into a court judgment.

• Accessibility: You can initiate adjudication "at any time," providing a constant mechanism to address payment issues as they arise.Recent reports show subcontractors are the most frequent users of adjudication in Ireland.

6. Expert Support When You Need It Most

Navigating subcontract terms, managing claims documentation, understanding the nuances of the CCA 2013, and pursuing adjudication effectively requires expertise. Trying to handle complex payment disputes alone while running your business can be overwhelming and risky.

Kiltoom Advisory: Championing Subcontractor Payment Rights

At Kiltoom Advisory, we have extensive experience assisting subcontractors across Ireland in securing the payments they are rightfully owed. We understand the specific challenges you face and provide tailored, practical support:

• Contract Review: Helping you understand payment terms and risks before you sign.

• Payment Claim Assistance: Advising on preparing compliant and effective Payment Claim Notices.

• Dispute Negotiation: Assisting in discussions with main contractors to resolve issues amicably.

• Adjudication Specialists: Expertly preparing Notices of Intention, Referral Notices, and managing the entire adjudication process on your behalf.

• Suspension Advice: Guiding you on the correct procedures and strategic considerations before suspending work.

Don't let unfair payment practices jeopardise your business. Know your rights, document diligently, and take decisive action.

--> Irish Subcontractors: Struggling with late or disputed payments? Contact Kiltoom Advisory today for a confidential discussion on how we can help you get paid.

Disclaimer: This article provides general information and does not constitute legal advice. You should seek specific professional advice tailored to your circumstances.