Commercial & Contract · Mandatory · Construction

Pay Less Notice

A notice stating the payer intends to pay less than the notified sum and the reasons why.

Last reviewed: 29 March 2026 — This guide reflects UK law as of this date. Construction Act 1996 remains current with no amendments enacted as of 29 March 2026. Next scheduled review: 29 March 2027.

Legal basis	Housing Grants, Construction and Regeneration Act 1996 s.111 (as amended 2009)
Deadline	Must be served not less than 5 days before the final date for payment under JCT contracts — the contract may specify a different prescribed period
Purpose	Allows the employer to pay less than the notified sum by specifying the sum considered due and the basis for calculating the difference
Common deductions	Value assessment (abatement of measured works), retention, defects rectification costs, contra charges, liquidated damages for delay

1. Pay Less Notice — The Employer's Sword and Shield

The pay-less notice is the mechanism by which an employer can pay less than the notified sum stated in the payment notice (or, where the contractor's application has become the notified sum by default, less than the amount applied for). Under s.111 of the Construction Act 1996, the employer may serve a pay-less notice specifying the sum that the employer considers to be due at the date of the notice and the basis on which that sum has been calculated. Without a valid pay-less notice served in time, the employer must pay the full notified sum.

The pay-less notice serves as both sword and shield. As a sword, it allows the employer to make legitimate deductions — abatement of the measured value, retention, costs of rectifying defective work, contra charges for site services or plant provided to the contractor, and liquidated damages for delay where the contractor has failed to achieve sectional or overall completion. As a shield, it protects the employer from having to pay the full notified sum where the contractor has over-valued the work or where legitimate set-offs exist.

The timing of the pay-less notice is critical. Under JCT contracts, the pay-less notice must be served not less than 5 days before the final date for payment. If the employer misses this deadline by even one day, the right to pay less is lost for that payment period, and the full notified sum must be paid. The employer's remedy after paying is to commence a true value adjudication or to make the deduction in the next interim period — but the notified sum for the current period must be paid in full.

Missing the pay-less notice deadline means the full notified sum must be paid

If the employer fails to serve a valid pay-less notice within the prescribed period before the final date for payment, the employer loses the right to pay less than the notified sum for that payment period. The full notified sum must be paid by the final date for payment. This applies regardless of whether the employer has legitimate grounds for deduction. The courts have enforced this principle strictly — the pay-less notice regime is a procedural requirement, and failure to comply with the procedure has immediate financial consequences.

2. Pay Less Notice — Content

Field	Detail
Notice reference	Unique sequential reference for the pay-less notice (e.g. PLN-001). Links to the corresponding payment notice and interim payment application.
Date	The date the pay-less notice is served. Must be served not less than 5 days before the final date for payment (or such other period as specified in the contract).
To	Full legal name and address of the contractor to whom the pay-less notice is served.
From	Full legal name and address of the employer serving the notice. The notice must be served by or on behalf of the paying party.
Application reference	Reference to the contractor's interim payment application and the corresponding payment notice to which this pay-less notice relates.
Notified sum	The sum stated in the payment notice (or the contractor's application where it has become the notified sum by default). This is the amount that would be payable without the pay-less notice.
Sum considered due	The sum that the employer considers to be due at the date of the pay-less notice. Must be a genuine assessment, not an arbitrary reduction.
Deductions	A detailed breakdown of each deduction, including: value assessment (abatement), retention, defects rectification costs, contra charges, liquidated damages, and any other set-off. Each deduction must be separately identified with the basis for calculation clearly stated.
Net sum payable	The net sum that the employer intends to pay by the final date for payment after all deductions. This is the notified sum less the total deductions specified in the notice.
Signed by	Name, position, and signature of the authorised person serving the pay-less notice on behalf of the employer.

3. Common Mistakes

Not tracking the pay-less notice deadline

The deadline for serving a pay-less notice is calculated backwards from the final date for payment — not forward from the payment due date. Under JCT, it must be served not less than 5 days before the final date for payment. Many employers track the payment notice deadline (5 days after the due date) but fail to separately track the pay-less notice deadline. A payment register that calculates and displays all four key dates — due date, payment notice deadline, pay-less notice deadline, and final date for payment — is essential for compliance.

No basis specified for the deductions

A pay-less notice must specify the basis on which the sum considered due has been calculated. A notice that simply states a reduced figure without explaining why — which deductions have been made, the amount of each deduction, and the contractual or factual basis for each — may not constitute a valid pay-less notice. The courts have considered the adequacy of pay-less notices in multiple cases, and a notice that lacks sufficient detail to enable the contractor to understand the basis for each deduction is at risk of being held invalid.

Serving the pay-less notice before the notified sum is established

A pay-less notice can only be served after the notified sum has been established — either by the employer's payment notice or by the contractor's application becoming the notified sum by default. Serving a pay-less notice before the payment notice has been issued, or before the 5-day deadline for the payment notice has expired, creates uncertainty about whether the notice is valid. The pay-less notice must relate to a specific notified sum and must specify the sum the employer considers due as an alternative to that notified sum.

4. Frequently Asked Questions

Can the employer raise a true value adjudication after paying the notified sum?▾

Yes. If the employer has paid the full notified sum (either because no pay-less notice was served, or because the pay-less notice was served late and was therefore invalid), the employer's remedy is to commence a true value adjudication. In a true value adjudication, the adjudicator determines the actual value of the work carried out, and if the employer has overpaid, the adjudicator can order the contractor to repay the difference. The smash and grab mechanism ensures that the contractor receives prompt payment in the interim, but it does not prevent the employer from subsequently establishing the true value of the work. The employer bears the burden of commencing the true value adjudication and proving the extent of any overpayment.

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