Table of Contents

Construction Sector Payment Practice Requirements

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This article explains the specific payment practice requirements for construction companies in the ERP system, including retention clauses and sector-specific reporting.

Construction-Specific Requirements

Qualifying contracts

A construction contract qualifies for reporting if it:

  • Is between two businesses.
  • Relates to construction operations.
  • Has sufficient UK connection.
  • Is not with a residential occupier.

Retention payment reporting

From October 2024, construction companies must report:

  1. Standard retention clauses:

    • Use of retention clauses in contracts
    • Standard percentage rates
    • Release mechanisms and timelines

  2. Retention payment performance:

    • Value of retentions held
    • Release patterns and timelines
    • Disputes affecting retention release

Setting up construction reporting

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Construction Payment Setup, and then choose the related link.

  2. Configure retention tracking:

    • Enable retention tracking
    • Set default retention percentages
    • Define release stages

  3. Set up retention reporting:

    • Configure retention clauses
    • Define release mechanisms
    • Set up performance tracking

Industry benchmarks

Current sector performance metrics (as of 2024):

Company Type Average Payment Days % Paid Within 60 Days
Main Contractors 35 days 92%
Specialists 44 days 89%
House Builders 38 days 91%

Monitoring performance

  1. Track key metrics:

    • Average payment times
    • Retention hold percentages
    • Release compliance rates

  2. Compare against benchmarks:

    • Industry averages
    • Competitor performance
    • Government targets

Retention release process

  1. Configure standard release triggers:

    • Practical completion
    • End of defects period
    • Final account agreement

  2. Set up automated notifications:

    • Due date reminders
    • Release approvals
    • Payment processing

Reporting requirements

Mandatory disclosures

Report on:

  1. Retention clause usage:

    • Standard terms
    • Variations by contract type
    • Release mechanisms

  2. Performance statistics:

    • Value of retentions held
    • Release compliance rates
    • Dispute resolution times

Additional construction metrics

Track and report:

  • Supply chain payment performance.
  • Project completion payment timing.
  • Dispute resolution effectiveness.

Government requirements

  1. For public sector contracts:
  • Maximum 30-day payment terms.
  • Retention bonds as alternatives.
  • Project bank accounts usage.
  1. Construction companies should:
  • Pay 95% of invoices within 60 days.
  • Work toward 30-day standard.
  • Report performance transparently.

PayTrack 365 Overview
UK Reporting Requirements
Supply Chain Finance
Walkthrough: Construction Retention
Process: Dispute Resolution

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