I have worked for a main contractor, sub-contractor and, for my sins, I married a PQS - so I’d like to think I have a bit of an idea around how late payments work – though, as always, I’m happy to be corrected.
In the worst case scenario main contractors retain money from sub-contractors so that they can invest/buy land.
“Evil main contractors!” I hear you say? Well no, not always. Whilst some companies do this as a business model, many are being forced back down a route that was abandoned in the early 2000’s due to client’s ever increasing pressure to reduce costs. This means profit margins are slashed and the retention of payment is the only way to make money.
Evil clients then? Well, again, not always; when everyone is submitting similar prices it can be hard to know that something should cost more. Also, the news is rife with stories about construction bid-rigging and cover-pricing. Although in industry we might know there is a big difference between these terms and clients have asked for a cover price on more than one occasion, localised clients don’t. This means there is an air of distrust and reasonable prices can be seen as a bit of a con.
Why does late payment matter to the people?
Quite a few reasons:
- Sub-contractors have to wait up to three months to get paid, which can mean making staff redundant, but more likely moving to a self-employed model of work. Whilst there are up-sides to this for those who enjoy true self-employment, there is a dirty dark side. Harvey  found a large number of people working in construction were falsely self-employed, meaning they had no choice over the hours they worked (the same as a regular employee), but did not receive employee benefits such as holiday pay, sick pay and employment rights. In the very worst cases, the situation was used to pay people less than minimum wage. This isn't to say that this happens to everyone everywhere, but it does happen and late payments encourage that. As a site manager once said to me, “we once employed a team to supply and pour concrete for less than we could buy it with our own substantial discount – we really should have looked into that.”
- As a site manager bad subbies would make my life very difficult, and it’s pretty likely that a underpaid, unfairly treated person is not going to be a pleasure to work with - the worse we treat people the worse they behave. Don’t believe me? Look at your own reactions - very few people can smile in the face of constant disadvantage; obviously I’m not including Preston fans. This means our lives are made increasingly difficult, subcontractors are harder to work with and yet we have the same, if not shorter, time frames to do it all in. Not exactly great for our blood pressure.
- If, as often happens, a sub-contractor goes under due to late payments, someone is needed to come in last minute which is never easy to find, creating additional headaches and cost. Quite often, more cost than would have been saved if the subbie had been paid on time in the first place.
- The image of the industry also slips again; stories of late payment, subbies going under and false self-employment create a bleak picture of the industry and of those who work in it, which ultimately feeds the client view.
Before anyone says this blog adds to the problem, I would disagree. The problem is that acceptance of late payment practices treats people as if they don’t have rights or an expectation of fairness. As a sector we must work together to eradicate these issues by first acknowledging they exist, then finding a way to overcome them. Whilst we are fragmented and apart, Clients cannot always see when a rogue contractor is bringing the sector down. By signing and adhering to a code of practice we can take the steps in the right direction. And though no one is saying this will make the world better overnight, at least it won’t be pushing it further backward.
Happy Building, Chrissi.
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