How to issue payment notices on time under the Construction Act

You issue payment notices on time by working out every date in each payment cycle on the day the subcontract is signed, and putting those dates in a diary. In England, Wales and Scotland the Construction Act says every construction contract must provide for a payment notice not later than five days after the payment due date, and it says the payer must pay the notified sum unless a pay less notice is given in time. The valuation is your quantity surveyor's. Knowing which date is next is work an AI worker can take on.

Why a missed date costs more than a late payment

The Housing Grants, Construction and Regeneration Act 1996 applies to most construction contracts for work in England, Wales or Scotland. A contract with a residential occupier is one of the exceptions. Three of its rules make the dates matter.

• The payment notice. The contract must require a notice, not later than five days after the payment due date, stating the sum considered due and the basis on which it is calculated. This holds even where the sum is zero.

• The default. Where the payer's notice is due and is not given, the payee may give a notice of its own. Where the contract already let the subcontractor notify the sum it considers due, and it did so in accordance with the contract, that application is treated as the notice.

• The notified sum. The payer must pay the notified sum on or before the final date for payment, unless it has given a notice of its intention to pay less. That notice has a deadline too: the period the parties agreed or, where they agreed none, the one in the Scheme for Construction Contracts. In the Scheme for England and Wales it is not later than seven days before the final date for payment.

The Act also gives an unpaid party the right to suspend work after at least seven days' notice. Your own contracts may set different periods where the Act allows it, and where a contract is silent the Scheme fills the gap: in England and Wales, a final date for payment 17 days after the due date. Scotland has its own Scheme.

What happens if a payment notice is late?

If the payment notice is not given by its date, the subcontractor may give a notice of its own at any time after that date. The final date for paying the sum in the subcontractor's notice then moves back by as many days as its notice came after the date yours was due. Where the subcontractor's application already counts as the notice, under the default rule above, it may not give another. Put together, an application made as the contract provides, and met with no notice in time, can become the sum to pay. How any of this applies to one of your contracts is a question for your surveyor or solicitor.

How to issue payment notices on time, step by step

1. At signing, write out the payment calendar. For each subcontract and each payment cycle: the date an application is expected, the due date, the last day for the payment notice, the last day for a pay less notice, the final date for payment. All five come from the subcontract. Today this is in the surveyor's head.

2. Log every application the day it arrives. Date and time received, who sent it, to which address, the period it covers, the sum applied for. They arrive at the surveyor's inbox, the accounts inbox and the site manager's phone alike.

3. Put the valuation pack together. The previous certificate, the last application, variations instructed since, site records for the period.

4. Value the work. The surveyor's job: measure, assess variations, decide what is due and why.

5. Give the payment notice by its date. The sum and the basis of calculation, sent in the way the subcontract requires, by the person it names.

6. Decide on a pay less notice before its deadline. If something has changed since the payment notice, the decision and the notice are needed by that date, and not at five o'clock on it.

7. Pay by the final date. Accounts make any CIS deduction and pay. Record the date paid against the cycle.

Can an AI worker keep the payment calendar?

An AI worker can, from the dates your surveyor gives it. This is work for an AI worker. Here it can build the payment calendar for each subcontract and keep it for every cycle. It can watch the inboxes you choose, log each application the day it arrives and tell the surveyor it is in. It can gather the pack for the valuation, remind the surveyor ahead of each notice date and again the day before, and give the commercial manager a morning list of notices due that week. After the notice it can pass the certified sum to accounts, where the invoice is handled as described under purchase invoice processing. The same diary can hold the dates covered by renewals and expiry tracking.

What waits for a person, and why

The valuation is professional judgement. Whether an application was made in accordance with the contract is a question of contract, and so is which dates apply: an AI worker keeps the dates it is given and does not interpret the subcontract. Every payment notice and pay less notice is the surveyor's, written and sent in their name, because a notice has legal effect. Payment and the CIS deduction stay with accounts; an AI worker never moves money.

What to have ready before you start

A list of live subcontracts with the payment terms of each. One address that applications must be sent to, written into your subcontract orders from now on. A notice template your surveyor is happy with. And a named deputy for each surveyor, because the dates do not move for a week's holiday. All four can be done tomorrow. Our page for construction contractors covers the rest of the subcontractor paperwork an AI worker can take on, from CIS details to expiring cards, and scaling a construction company without hiring makes the wider case.

Your surveyor would still value every application and write every notice; an AI worker would keep each subcontract's payment dates, log each application the day it arrives and give the reminder before a notice falls due. Has a notice date ever been found the day after it passed? Talk to our agent.