Getting Paid as a Subcontractor: No Security of Payment Act

South Africa has no Security of Payment Act. There is no statutory payment claim, no automatic adjudication right and no law that strikes out pay-when-paid clauses. Your right to be paid as a subcontractor comes from three places only: the contract you signed, the common law, and the dispute clause inside that contract. That makes the paperwork you sign before you start more important here than in almost any other construction market.‍‌​​‌​‌​​​‌​​‌​​​​‌‌‌‌‌‌​​‌‌​​​​​‍

No safety net: what that means

The UK and Australia give subcontractors statutory tools: serve a payment claim, get a fast adjudication decision backed by legislation, and pay-when-paid clauses are void by law. None of that exists in SA. If your contract is silent or one-sided, you are left with a letter of demand, the courts, and whatever leverage you can create on site.

There is one partial exception. On government work, the Public Finance Management Act (PFMA) of 1999 requires organs of state to settle contractual obligations within 30 days of receipt. That rule protects the main contractor against the government employer. It does not protect you against the main contractor.

How payment works under the standard contracts

Each standard form creates its own payment machinery. Know which one you are under before you price the job:

• JBCC (Joint Building Contracts Committee). The Principal Agent (PA) certifies the value of work executed each month. The certificate is a liquid document: a written record of a fixed sum with an unconditional obligation to pay, which can be taken to court on its own. Payment is due within days of the certificate. The figure commonly quoted for recent editions is 7 calendar days, but the exact day count depends on your edition and on the Nominated/Selected Subcontract schedule, so check your own signed document rather than relying on a universal number. The contract documents are published by the JBCC.
• NEC3 and NEC4. A Project Manager (not a Principal Agent) assesses the Price for Work Done to Date each assessment interval, and the payment period is whatever the Contract Data says. Retention only exists if secondary Option X16 is expressly included. Documents at NEC.
• GCC 2015 (the General Conditions of Contract, common on civils work). The Engineer issues a payment certificate within 7 days of receiving the contractor's monthly statement, and the employer then pays within 28 days of the certificate. An employer who disagrees with a certified amount must raise it through the Engineer; it cannot simply withhold payment.
• FIDIC Red Book. Payment 28 days after the certificate, retention typically 5 to 10%.

Retention of around 5% per interim payment is the norm across the forms, with half released at practical completion (see Retention Money).

Pay-when-paid and pay-if-paid clauses

These two clauses look similar and are worlds apart:

• Pay-when-paid changes the timing of your payment: the main contractor pays you once it has been paid by the employer.
• Pay-if-paid is a true condition: the main contractor only ever owes you money if the employer actually pays it.

Both are enforceable in South Africa. There is no statute banning them, so a clearly worded, expressly agreed clause will be upheld by an SA court. This is the opposite of the position in the UK and Australia, and it is the single biggest payment risk a subbie signs. If the employer goes insolvent before paying the main contractor, a pay-if-paid clause can leave you with nothing for completed work.

If you cannot strike the clause, soften it:

• Negotiate a maximum waiting period, for example 60 days after your invoice regardless of upstream payment.
• Add a long-stop date after which you may claim no matter what.
• Ask for a payment guarantee from the employer or a surety.
• On larger projects, propose an escrow or trust account. More options in Securing Payment Before You Start Work.

The escalation ladder when payment stops

When a certified or due amount does not arrive, escalate in this order:

1. Letter of demand. Formal, in writing, with a 14-day deadline (see Chasing Unpaid Invoices).
2. Invoke the dispute clause. Under JBCC that is adjudication via clause 30; under NEC it is Option W1 or W2. An adjudicator's determination is binding on the parties as a matter of contract (see Adjudication, Mediation and Arbitration).
3. Exercise your builder's lien. If you still hold the site, do not leave it. Perfect the lien immediately (see The Builder's Lien).
4. Go to court. The Magistrates' Court or High Court for a default judgment if the contract has no dispute clause, or to enforce an adjudication determination that is being ignored.
5. Winding-up application. If the debt is undisputed and the contractor is plainly insolvent, a liquidation application is a high-pressure last resort. Take legal advice first.

Worked example

Sipho's tiling company completes a R180,000 subcontract under a JBCC Nominated/Selected Subcontract. The Principal Agent certifies R180,000 on 1 March. His subcontract requires payment within 7 calendar days, so the money is due by 8 March. By 22 March nothing has arrived. Sipho sends a letter of demand giving 14 days. Still nothing, so he refers the dispute to adjudication under the JBCC dispute clause. The adjudicator determines that R180,000 plus interest is due, and the determination is immediately binding. When the main contractor still does not pay, Sipho applies to the High Court to enforce the determination.

Common mistakes

• Signing a pay-if-paid clause without reading it. You have agreed to carry the employer's insolvency risk for free.
• Not knowing which contract form you are under. The payment machinery, day counts and dispute routes all differ.
• Treating the certificate as the money. A certificate is a strong legal document, but you still have to enforce it if payment does not follow.
• Leaving site while owed money. Walking off voluntarily destroys your lien, your best free leverage.
• Assuming the government 30-day rule covers you. The PFMA protects the main contractor, not the subbie.

How this site is funded →

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? SADAG 0800 567 567 · Mental health support

How this site is funded →