A pay less notice is a written notice, required under the Construction Act, in which a payer tells the payee that it intends to pay less than the sum stated in the Payment Notice.
It must give the sum the payer considers due and the basis of the calculation, and it must be served within the time the contract sets before the final date for payment. Miss that deadline and the payer generally has to pay the notified sum in full.
Worked example
A Main Contractor receives a Subcontractor's application for £60,000 and issues a payment notice for £54,000. Before the final date for payment, the main contractor finds £3,500 of rectification work that the subcontractor has refused to attend to, and wants to deduct it. It serves a pay less notice stating a sum due of £50,500 and explaining the deduction.
| Item | £ |
|---|---|
| Applied for | 60,000 |
| Payment notice | 54,000 |
| Deduction for rectification | (3,500) |
| Pay less notice, sum to be paid | 50,500 |
If the notice is late, the main contractor owes £54,000, and the £3,500 has to be recovered by another route.
Timing and the final date
The contract fixes the due date, the final date for payment and how many days before the final date a pay less notice must be served. Where the contract is silent or non-compliant, the Scheme for Construction Contracts fills the gap. Treat the final date as a hard stop and diarise it for every application.
Pay less notices in the valuation cycle
A pay less notice belongs in the same cycle as the Valuation. When a main contractor assesses a subcontractor's application, any deduction for defects, delay, back-charges or contra charges has to be reflected in the notice, with figures that tie back to the valuation.
Keeping the assessment, the deductions and the notice in one place shortens the time to get the notice out and makes it harder to dispute.
Payers who deduct without a valid pay less notice risk the payee suspending work or starting Adjudication for the unpaid balance, and interest can also run on late payment.
Related terms
Payment Notice, Construction Act, Contra Charge, Valuation, Interim Payment, Adjudication.
Planyard's subcontractor payment applications put each application, your assessed valuation and the deductions side by side, so the figures for a pay less notice are ready before the deadline.
