NEC4 Payment: How Clauses 50–53 Work in Practice

This guide explains the payment mechanism across all six main options, the timetable from assessment date to final date for payment, what changed between NEC3 and NEC4, and the common mistakes that cost contractors money. For UK contracts, secondary option Y(UK)2 adds statutory compliance requirements from the Housing Grants, Construction and Regeneration Act 1996.

Assessment Dates and the Payment Cycle

The payment cycle begins with the assessment date. The Client states the assessment interval in Contract Data Part 1. This is typically monthly or four-weekly. The first assessment date is also stated in Contract Data Part 1.

Before each assessment date, the Contractor must submit an application for payment to the Project Manager. The application must include the amount the Contractor considers is due and details of how that amount has been assessed. This is a fundamental change from NEC3, where the Project Manager initiated the assessment without requiring an application from the Contractor.

The payment timetable under NEC4 with Y(UK)2 runs as follows:

The standard NEC4 payment cycle is 21 days from assessment date to final date for payment: 7 days to the due date, then 14 days to the final date for payment. Parties can amend the 14-day period in Contract Data, but the mechanism must remain compliant with the Construction Act.

Price for Work Done to Date

The amount due at each assessment date is the Price for Work Done to Date (PWDD), plus other amounts to be paid to the Contractor, less amounts to be paid by or retained from the Contractor (clause 50.3). The PWDD is calculated differently depending on the main option selected.

Under Options A and B, the Contractor takes all cost risk. If actual cost exceeds the price, the Contractor absorbs the difference. Under Options C and D, the pain/gain share mechanism distributes cost risk between Contractor and Client according to the share percentages in Contract Data Part 1. Under Option E, the Client takes all cost risk because the Contractor is reimbursed actual cost.

The distinction matters for compensation events. Under Options A and B, an accepted CE quotation changes the Prices directly. Under Options C and D, an accepted CE quotation changes the target (the Prices) but the Contractor is still paid Defined Cost plus Fee for the work. The CE adjusts the target against which the pain/gain calculation is made at Completion.

The Contractor's Application

Clause 50.2 requires the Contractor to submit an application before the assessment date. The application must state the amount the Contractor considers is due and include details of how it has been assessed.

This obligation has real consequences. Under clause 50.4, if the Contractor does not submit an application before the assessment date, the Project Manager assesses the amount due as the lesser of:

• the amount the Project Manager assesses as due at the assessment date, or
• the amount due at the previous assessment date.

The effect is that the amount due cannot increase from the previous period if no application is submitted. The Contractor will receive no more than the previous certified amount, and could receive less if the PM assesses a lower figure. In some circumstances the Contractor could owe money back to the Client.

Project Manager Certification

Under clause 51.1, the Project Manager certifies a payment within one week of each assessment date. The certificate must show the amount the PM considers is due and the basis on which it has been assessed. This transparency requirement was introduced in NEC4. Under NEC3, the Project Manager assessed the amount due but was not required to show the calculation.

The PM's certificate is the payment notice for the purposes of the Construction Act (where Y(UK)2 applies). If the PM fails to certify within the required period, the Contractor's application may become the default payment notice under section 110B of the Construction Act 1996 (as amended). This creates a risk of smash-and-grab adjudications where the Contractor can enforce payment of the full application amount because the Client failed to issue a valid payment notice or pay-less notice in time.

Pay-Less Notices

Under Y(UK)2, if either Party intends to pay less than the notified sum, it must issue a notice of intention to pay less (NEC4 terminology) not later than 7 days before the final date for payment. The notice must state the amount considered due and the basis on which it has been calculated.

If the pay-less notice is issued late, the notified sum remains due in full regardless of whether the payer believes a different amount is correct. The deadline is absolute. A pay-less notice issued 6 days before the final date for payment rather than 7 is invalid. The full notified sum must be paid, and any dispute about the correct amount is resolved separately through the dispute mechanism under Option W1, W2 or W3.

Pay-less notice timing

Assessment date: 1 March. Due date (7 days later): 8 March. Final date for payment (14 days after due date): 22 March. Pay-less notice deadline (7 days before final date): 15 March.

The Contractor submits an application for £1,250,000. The PM certifies £1,150,000 on 5 March (within the 7-day window). The certified amount is the notified sum. If the Client wants to pay less than £1,150,000, a valid pay-less notice must be issued by 15 March at the latest. If no pay-less notice is issued, £1,150,000 must be paid by 22 March. If a pay-less notice is issued stating £980,000 with a valid basis, the Client pays £980,000 by 22 March and the difference is resolved through the dispute process.

Final Assessment

Clause 53 introduces formal final assessment provisions. This is entirely new in NEC4. NEC3 had no final account mechanism, which was one of its most criticised features. Disputes about the final amount due could remain unresolved indefinitely.

Under clause 53.1, the Project Manager makes a final assessment of the amount due no later than four weeks after the Supervisor issues the Defects Certificate, or thirteen weeks after the Project Manager issues a termination certificate.

If the Project Manager does not issue the final assessment within the required period, the Contractor may issue its own assessment of the final amount due to the Client. If the Client does not respond within a stated period, the Contractor's assessment may become conclusive.

Once issued, the final assessment is conclusive evidence of the final amount due unless a Party refers a dispute about it to the dispute resolution process under Option W1, W2 or W3 within the period stated in the contract (clause 53.3). This creates a binding finality that did not exist in NEC3. The consequence of missing the dispute referral deadline is that the final assessment stands, even if a Party believes it is incorrect.

What Changed Between NEC3 and NEC4

Six changes are worth noting.

Contractor's application required. NEC3 operated on a payer-led basis. The Project Manager assessed and certified the amount due without requiring an application from the Contractor. NEC4 reverses this: the Contractor must submit an application before each assessment date, and failure to do so caps the amount due at the previous period's level or lower (clause 50.4).

PM must show the assessment basis. NEC4 clause 51.1 requires the Project Manager's certificate to show how the amount has been assessed. NEC3 required certification but not transparency of calculation. This change gives the Contractor the ability to identify and challenge specific elements of the assessment rather than disputing a single figure.

Programme retention introduced. NEC4 clause 50.5 withholds 25% of PWDD if the Contractor has not submitted a programme for acceptance. NEC3 had no equivalent provision. This creates a strong cash flow incentive for early programme submission.

Final assessment added. Clause 53 introduces a formal final account mechanism with defined timescales and conclusive effect. NEC3 had no final assessment process, meaning disputes about the final amount could persist indefinitely.

Simplified fee structure. NEC3 used multiple fee percentages (subcontract fee, direct fee, working area overhead, people overhead). NEC4 uses a single fee percentage, simplifying the PWDD calculation under Options C, D, E and F.

Terminology update. NEC3 used "notice of intention to withhold payment." NEC4 uses "notice of intention to pay less," aligning with the terminology in the Construction Act as amended.

Common Mistakes in Practice

Failing to submit applications before the assessment date. This is the most common error and its consequences under NEC4 are severe. Under clause 50.4, a missed application means the amount due will not increase from the previous period. On a large project with monthly applications, a single missed deadline can freeze cash flow for an entire payment cycle. Many contractors still treat the application as optional or administrative. Under NEC4, it is a contractual obligation with direct financial consequences.

Not including the assessment basis in the application. Clause 50.2 requires the Contractor to state the amount considered due. But for the application to function as a default payment notice under the Construction Act, it must also show the basis of calculation. A Contractor who submits only a figure without supporting calculation may forfeit the smash-and-grab protection that would otherwise apply if the PM fails to certify on time.

Issuing pay-less notices late. The 7-day deadline before the final date for payment is absolute. A notice issued one day late is invalid. The full notified sum becomes due regardless of the payer's view of the correct amount. Many clients and Project Managers underestimate how strict this deadline is, particularly when the final date for payment falls on a weekend or bank holiday. The safe approach is to issue pay-less notices well before the deadline, not on it.

Ignoring the programme retention. Clause 50.5 retains 25% of PWDD if no programme has been submitted. On a £10,000,000 contract with £2,000,000 of PWDD in the first assessment, this retention is £500,000. Some contractors treat programme submission as secondary to mobilisation. Under NEC4, the financial penalty for delay is immediate and substantial.

Treating Disallowed Cost as a payment dispute rather than a defined mechanism. Disallowed Cost under clause 11.2(26) is deducted from the amount due in the PM's assessment. It is not a matter for pay-less notices. It is part of the assessment itself. Confusing the two mechanisms leads to procedural errors that can result in paying amounts that should have been deducted, or attempting to deduct amounts through the wrong process.

Interest on Late Payment

Clause 51.3 entitles the Contractor to interest on any late payment. Interest is calculated from the final date for payment to the date of actual payment at the interest rate stated in Contract Data Part 1 (typically 2% above the Bank of England base rate). The interest provision applies automatically. The Contractor does not need to claim it or submit a compensation event notification. It is an entitlement arising directly from late payment.

Where Y(UK)2 applies, the Contractor also has the right to suspend performance if payment is not made by the final date for payment. The right to suspend is a statutory right under section 112 of the Construction Act 1996 (as amended), subject to giving 7 days' notice of intention to suspend. The suspension itself is a compensation event under secondary option Y2.5, and the costs are assessed through the standard CE quotation and assessment process.