If you are a contractor or a subcontractor in the construction industry, you know how important it is to get paid on time for your work. But sometimes, you may face delays, disputes or even non-payment from your clients. That's why you need to know about Payment Schedules and how they can help you secure your cash flow and protect your rights under the Security of Payment Act (SOPA).
What is a Payment Schedule?
A Payment Schedule is a document that responds to a Payment Claim, which is a request for payment for construction work or related goods and services. A Payment Claim must include the following information:
- The name of the claimant and the respondent
- The date of the claim
- The amount claimed
- The description of the work or goods and services
- The reference date under the contract or SOPA
- A statement that it is made under SOPA
A Payment Schedule must be served within the time allowed by the construction contract or SOPA, whichever is earlier. If there is no time specified in the contract, then it must be served within 10 business days after receiving the Payment Claim.
Important Note: If a subcontractor or supplier submits a claim on a Sunday Evening rather than Monday, the 10 Business Days starts from that Monday, please keep that in mind as it is a common tactic to ensure full claim payment or cause an adjudication.
Why are Payment Schedules important?
Payment Schedules are important for several reasons:
- They show that you acknowledge and respond to the Payment Claim
- They indicate how much you agree or disagree to pay and why
- They trigger the adjudication process under SOPA if there is a dispute over payment
- They prevent you from being liable to pay the full claimed amount if you fail to serve a Payment Schedule
How do Payment Schedules help with Progress Claim reviews?
Progress Claims are periodic requests for payment for work done or goods and services supplied during a construction project. They are usually based on milestones, stages or percentages of completion. Progress Claims help contractors and subcontractors maintain their cash flow and avoid financial stress.
Payment Schedules help with Progress Claim reviews by providing a clear and transparent record of what has been done, what has been paid and what is outstanding. They also help to identify and resolve any issues or disputes that may arise during the project. For example, if a client disputes the quality or quantity of work done, they can state their reasons in the Payment Schedule and propose a lower payment amount. Alternatively, if a contractor disputes the reasons for withholding payment, they can apply for adjudication under SOPA and seek a binding decision from an independent adjudicator.
What is SOPA and why is it relevant?
SOPA stands for Security of Payment Act, which is a legislation that applies to building and construction contracts in Australia. Each state has its own SOPA, which may differ in some details, but they all have the same purpose: to ensure that anyone who carries out construction work or supplies related goods and services gets paid promptly.
SOPA is relevant because it grants contractors rights to receive progress payments even if there is no formal written contract or even if a contract says that they are only allowed to receive payment at the end of works. It also sets maximum time limits to respond to Payment Claims and Payment Schedules, maximum payment terms, interest rates on unpaid amounts, and a right to suspend work in case of non-payment. It also prohibits 'pay when paid' clauses, which means that contractors do not have to wait until their clients get paid by their head contractors or principals. Most importantly, it provides a fast and low-cost adjudication process to resolve payment disputes without going to court.
How can I get more information on Payment Schedules and SOPA?
If you want to learn more about Payment Schedules and SOPA, you can visit these websites:
- https://www.mertonlawyers.com.au/blog/progress-claims
- https://hhlaw.com.au/eng/insights/view/316
- https://info.smallbuilders.com.au/2016/03/14/payment-schedules-what-are-contractors-rights/
You can also check out my store where I sell ready-made Payment Schedule template that you can use for your own projects. It is easy to use, compliant with SOPA and tailored to your specific needs. Just click on this link: Progress Claim Review Template (salvaresolutions.com)