Subcontract Clauses That Protect You From Slow Payers

You’ve done the work. The invoice went out weeks ago. Now you’re checking your bank account every morning and wondering if you’ll ever see the money. Slow payers aren’t just frustrating—they can cripple a small construction business.

The good news: you don’t have to accept it. The right subcontract clauses can shift the power back to you, making it harder for head contractors and builders to dodge payment or drag their feet. And if things do go south, clear contract language gives you solid ground to stand on when you file a payment claim.

Include a Binding Payment Schedule

This is your foundation. A payment schedule isn’t a wish list—it’s a written commitment to when money changes hands.

Your subcontract should specify:

• The date or condition when an invoice is due (e.g., “within 7 days of invoice date” or “within 7 days of completion of stage”)
• Who pays you (the head contractor, the developer, the builder)
• The currency and amount (or how it’s calculated)
• The payment method (bank transfer preferred—it leaves a clear trail)

Don’t accept vague terms like “payment upon project completion” or “within a reasonable time”. Reasonable means different things to different people, and by then you’ll be chasing invoices. Seven days is standard in the construction industry. Fourteen days is common but slower. Anything beyond that starts eating into your ability to pay your own suppliers and wages.

This specificity matters when you’re dealing with the Security of Payment legislation. In NSW, the Building and Construction Industry Security of Payment Act 1999 sets tight deadlines: the respondent has only 10 business days to issue a payment schedule once they receive your claim. Similar rules apply in Queensland (under the Building Industry Fairness Act 2017), Victoria (Security of Payment Act 2002), and other states. A crystal-clear contract term makes it harder for a slow payer to argue their way out of these obligations.

Add a Requirement for a Payment Schedule From the Head Contractor

Here’s a move that catches many tradies off guard: insist that the head contractor gives you a payment schedule in writing when you enter the contract.

This should show:

1. When you’ll be paid for each stage of work
2. What conditions must be met (inspections, sign-offs, etc.)
3. What happens if the head contractor is waiting on their own payment from the principal
4. Whether retentions apply (and when they’re released)

Many subcontractors accept a verbal agreement and only realise months later that the head contractor’s agreement with the principal has a 30-day payment cycle, plus retentions, plus their own cash-flow issues. By then you’re locked in. A written schedule gives you a reference point and removes ambiguity.

Set Retentions and Release Terms in Advance

Retentions (when the head contractor holds back a percentage of your invoice) are standard on most jobs. But they’re also a common excuse for delayed payment.

Your contract should spell out:

• The retention percentage (often 5–10%, sometimes more on larger projects)
• When retention is held (on invoices? on final payment?)
• When and how retention is released (e.g., “30 days after practical completion” or “upon final handover”)
• Interest payable if retention is held beyond the agreed date

Without this, you can end up with money stuck in limbo indefinitely. A head contractor might claim they’re waiting on their own final payment, or that there’s a defect they’re investigating. Having terms in writing means you can point to the contract and say, “This release date has passed. I’m owed my retention now.”

Include an Interest Clause for Late Payment

If someone owes you money past the due date, interest compounds the problem fast—and it’s a legitimate cost in construction.

Your subcontract can include:

• A default interest rate (e.g., 10% per annum, or the Reserve Bank rate plus 4%) that applies automatically to overdue amounts
• A clear statement that interest accrues from the due date until payment clears
• A right to suspend work if payment is overdue by a set number of days (e.g., 14 days)

Many head contractors will negotiate on the rate, but having it in the contract changes the conversation. Instead of asking “can you pay?”, you’re saying “here’s what it costs you if you don’t.” That’s a real incentive.

Interest clauses also strengthen your position if you end up needing to pursue a payment claim under your state’s Security of Payment legislation. The legislation allows you to claim not just the work, but also genuine costs of financing the delay.

Add Dispute Resolution and Payment Claim Language

Finally, make sure your subcontract acknowledges the Security of Payment Act that applies in your state. A simple clause like this works:

“Any dispute over payment is subject to [NSW Building and Construction Industry Security of Payment Act 1999 / QLD Building Industry Fairness Act 2017 / VIC Security of Payment Act 2002, etc.]. Either party may issue a payment claim and pursue fast-track adjudication in accordance with the Act.”

This isn’t a threat—it’s a statement of fact. But it reminds the head contractor that you have a statutory pathway to recover money, with tight deadlines and low-cost adjudication. Many disputes settle once both parties realise you’re serious.

Get It in Writing and Stay Organised

The clauses above only work if they’re in your actual subcontract and if you keep records. If you’re working on a handshake deal or a text message agreement, these protections disappear.

Before you start work:

• Send a written quote that includes payment terms
• Get a signed agreement, even if it’s just an email exchange
• Keep copies of invoices, payment records, and any correspondence about payment schedules
• Follow up late payments in writing (email is fine)

If payment does go south, you’ll have the evidence to back up a claim. And if you need to file a payment claim to enforce your rights, clear contract terms and good records make the process faster and stronger.

The Bottom Line

Slow payers often rely on confusion and weak documentation. Smart subcontract clauses—binding schedules, written retention terms, interest provisions, and clear references to Security of Payment legislation—take away their excuses. They won’t guarantee payment, but they’ll put you in a much stronger position to collect what you’ve earned.