Short answer: In most UK construction contracts, a clause that says you will only be paid once the main contractor has been paid is ineffective. Section 113 of the Housing Grants, Construction and Regeneration Act 1996 strikes it out unless someone up the payment chain is insolvent. If the contractor has not issued a valid pay less notice, the notified sum is due by the final date for payment, whether or not their client has paid them.
You finished the work, sent the application or invoice, and the reply comes back: "We'll pay you when the client pays us." For many subcontractors and suppliers to the building trade, this is the most common reason an invoice sits unpaid. The law has a direct answer to it.
This guide is general information for UK businesses, not legal advice. It focuses on England and Wales. Sources were checked on 2 November 2026: sections 108, 110, 111, 112 and 113 of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act).
Why "pay when paid" usually does not work
Section 113(1) says that a provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective. The contractor cannot use its own client's slow payment as a reason to hold back yours.
When the clause falls away, section 113(6) says the parties can agree other payment terms. If they have not, the payment rules in the Scheme for Construction Contracts apply instead, giving you a due date and a final date for payment.
The one exception: upstream insolvency
A pay-when-paid clause still works if the third party, or anyone further up the chain whose payment is a condition, is insolvent. Section 113 defines insolvency narrowly. For a company it means:
- it has entered administration;
- an administrative receiver, or a receiver or manager of its property, has been appointed;
- a resolution for voluntary winding-up has been passed without a declaration of solvency (a creditors' voluntary liquidation); or
- a winding-up order has been made.
A client that is simply slow, disputing the main contractor's account, or short of cash does not count. If the employer really has gone into an insolvency process, read our guide to a customer in administration or liquidation.
Pay-when-certified clauses are caught too
Some contracts try a different route: you are paid when the architect certifies the main contractor's work, or when the main contractor's own account is agreed. Since 1 October 2011 in England and Wales, section 110(1A) says a payment mechanism is not adequate if it makes payment conditional on obligations under another contract being performed, or on someone deciding whether they have been. Where the mechanism is not adequate, the Scheme fills the gap.
| Clause | Effect under the Construction Act |
|---|---|
| Pay when paid by the employer | Ineffective under s.113, unless an upstream party is insolvent |
| Pay when certified under another contract | Not an adequate mechanism under s.110(1A); the Scheme applies |
| Payment due only once the payer gives notice | Not an adequate mechanism under s.110(1D) |
| Agreed due date and final date for payment | Allowed; the parties choose the period between them |
Pay less notices and the notified sum
Under section 111, the payer must pay the notified sum by the final date for payment. If it wants to pay less, it must serve a valid pay less notice in time, saying what it thinks is due and how that was worked out. "We haven't been paid" is not a valuation of your work, so it is not a reason to pay less. Keep copies of every application, payment notice and pay less notice, with the dates they were sent and received.
Your options if you are still not paid
- Put it in writing. Reply that the pay-when-paid clause is ineffective under section 113, state the sum due and the final date for payment, and ask for payment by a set date.
- Claim interest and costs. Unless the contract gives a substantial remedy, statutory interest and fixed compensation may be added under the Late Payment of Commercial Debts (Interest) Act 1998.
- Suspend work. Section 112 lets you suspend performance after at least seven days' notice stating the grounds. You can recover reasonable costs and expenses of the suspension, and the period is added to your time for completion.
- Adjudicate a dispute. Under section 108, the adjudicator should be appointed within seven days of the notice and decide within 28 days of referral. The decision is binding until finally settled.
- Escalate an undisputed debt. Send a letter before action, then consider court or a statutory demand.
For wider issues in the trade, including retentions, see construction unpaid invoices and retention payments.
Frequently asked questions
Is a pay-when-paid clause legal in the UK? In most construction contracts, no. Section 113 of the Housing Grants, Construction and Regeneration Act 1996 makes a clause that ties your payment to the payer being paid by someone else ineffective. The only exception is where that third party, or someone further up the payment chain, is insolvent.
What replaces the clause if it is ineffective? Section 113(6) lets the parties agree other payment terms. If they have not, the payment provisions of the Scheme for Construction Contracts fill the gap, so you still get a due date and a final date for payment.
When can a contractor rely on pay-when-paid? Only where the employer or another party up the chain whose payment is a condition is insolvent in the way section 113 defines it, for example it has entered administration, a creditors' voluntary winding-up resolution has been passed, or a winding-up order has been made. A slow-paying but solvent client is not enough.
What about pay-when-certified clauses? Since October 2011 (1 November 2011 in Scotland), section 110(1A) says a payment mechanism is not adequate if it makes payment conditional on obligations under another contract being performed, or on someone deciding whether they have been. That catches most attempts to make a subcontractor wait for a certificate under the main contract.
Can I stop work if I am not paid? Yes, if the notified sum is not paid by the final date for payment. Section 112 lets you suspend some or all of your work after giving at least seven days' written notice stating the grounds. You can recover reasonable costs of the suspension and the time is added to your contract period.
Does this apply to every construction job? No. The Act covers most construction contracts in England, Wales and Scotland, but some are excluded, including most contracts with a residential occupier for work on their own home, and certain specified operations. Check whether your contract is covered before relying on these rights.
Is adjudication quicker than going to court? Usually. Under section 108 either party can refer a dispute at any time, the adjudicator should be appointed within seven days and decide within 28 days of referral, unless the time is extended. The decision is binding until a court, arbitration or agreement finally settles it.
Can your partner recover an unpaid construction invoice? We are an introducer, not solicitors or an FCA-authorised firm. Where a solvent Ltd, LLP or PLC owes you an undisputed invoice and our partner accepts it, the fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed. Disputed sums usually need adjudication or legal advice first.
If a trading Ltd, LLP or PLC owes you an undisputed invoice, upload the invoice via business debt collection or read how no collection, no fee works. The fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.