Pay-Less Notices — What They Are, Why They Matter, and What to Do

Of all the payment mechanisms in a JCT subcontract, pay-less notices are the one that catches subcontractors out most frequently. They arrive with little warning, can significantly reduce what you're paid, and if you miss the window to respond, there's often nothing you can do about it.

Understanding how pay-less notices work — and how to respond effectively — is one of the most practically valuable things any subcontractor can do.

What is a Pay-Less Notice?

A pay-less notice is a formal notice issued by the main contractor telling you that they intend to pay you less than the amount stated in your payment application. It must specify the amount they consider due and the basis on which that amount has been calculated.

Pay-less notices are a legitimate mechanism under the Construction Act and the JCT. They exist to allow main contractors to dispute valuations, deduct for LADs, or recover sums they believe are owed. Used properly, they're a reasonable part of the payment process. The problem comes when they're used as a cash flow tool — issued late to defer payment — or when they contain deductions that aren't properly justified.

How the Payment Process Works

To understand pay-less notices, you need to understand the full payment cycle under a JCT subcontract:

1. You submit a payment application by the specified date in the contract
2. The main contractor must issue a Payment Notice within a specified period — typically 5 days of the due date — stating the sum they consider due
3. If no Payment Notice is issued, your application becomes the 'notified sum' — the amount that should be paid
4. The final date for payment is typically 14–21 days after the payment due date
5. If the main contractor intends to pay less than the notified sum, they must issue a Pay-Less Notice before the final date for payment — under JCT 2024 standard terms, at least 5 days before
6. On the final date for payment, you should receive the amount in the Pay-Less Notice — or the full notified sum if no notice was issued

The Pay-Less Notice Window — Why It Matters

The timing of the pay-less notice window is critical. Under JCT 2024 standard terms, the notice must be issued at least 5 days before the final date for payment. This gives you time to consider the notice and take advice if necessary.

What Should a Valid Pay-Less Notice Contain?

A valid pay-less notice must:

• Be in writing
• Specify the sum that the main contractor considers due on the payment date
• Specify the basis on which that sum has been calculated — a vague notice that simply states a lower figure without explanation is not valid
• Be issued before the deadline specified in the contract

If a pay-less notice doesn't meet these requirements, it may not be valid — which means the full notified sum remains payable.

What to Do When You Receive a Pay-Less Notice

Step 1 — Check the Timing

The first thing to check is whether the notice was issued within the contractual deadline. If it was issued late — even by one day — it may not be valid. Check your contract for the exact deadline and compare it to when the notice was received.

Step 2 — Check the Content

Read the notice carefully. Does it specify the sum they consider due? Does it explain the basis of the calculation? Is it clear what deductions are being made and why? A notice that simply states a lower figure without explanation is legally questionable.

Step 3 — Assess the Deductions

Work through each deduction. Common deductions include:

• Disputes about the value of work completed — check your application against the contract and any agreed valuations
• LAD deductions — check whether these are justified and whether you have extension of time entitlement
• Contra charges for materials, labour, or rectification — check whether these are properly evidenced and contractually permitted
• Retention — check the calculation is correct based on the agreed rate

Step 4 — Respond Promptly

If you believe the pay-less notice is invalid or the deductions are unjustified, respond in writing immediately. State clearly why you believe the notice is invalid or the deductions are wrong. Keep your response professional and factual.

Step 5 — Consider Adjudication

If the dispute can't be resolved through correspondence, adjudication is your fastest route to resolution. You have a statutory right to refer any payment dispute to adjudication at any time, and a decision is typically given within 28 days. The main contractor must pay the adjudicator's decision immediately, even if they subsequently appeal.

Prevention — the Best Approach

The best way to deal with pay-less notices is to reduce the likelihood of them arising in the first place:

• Submit payment applications on time, in the correct format, and with clear supporting information
• Agree valuations with the main contractor's surveyor as you go — disputes at the end of a job are harder to resolve
• Keep your records — programme, daily diaries, photographs, correspondence — up to date throughout the project
• Know your payment dates — calendar alerts for every payment due date and pay-less notice deadline on every contract
• Address disputes early — a commercial conversation about a disputed valuation is far better than a pay-less notice followed by adjudication

Key Takeaways