Subcontractor rights: Australian construction industry rates poorly on overdue payments

The Australian construction industry is weighed down by the issue of overdue payments. This comes as Queensland boosts subcontractor rights for its workers.The Queensland government is introducing tougher measures to boost subcontractor rights and crack down on overdue payments. And the timing couldn’t be better, as unpaid invoices become a sore point in the Australian building industry. Four in 10 construction invoices are paid late across the nation, according to a survey by Dun and Bradstreet. Only 60 per cent of construction workers were paid on time, during the second quarter of last year. The building sector was one of the top offenders, out of 15 industries involved in the research. But it’s not all downhill: the rate of late payments actually improved for builders by 1.8 days over 2017. Although this gives way to optimism, the Australian construction industry still has a long way to go. Luckily it’s becoming difficult for key players to sweep this issue under the rug. The Australian Small Business and Family Enterprise Ombudsman has put a spotlight on the non-payment culture that threatens subcontractor rights.
Australian construction industry

Federal government sits on calls to improve subcontractor rights in Australian construction industry:

The Australian Small Business and Family Enterprise Ombudsman focused on overdue payments for government projects in its report. Their inquiry calls for the government to pay invoices within 15 days. Other recommendations ask the federal government to:
  • Roll out its payment policies to all entities and agencies.
  • Publish payment times and policies, set best practice benchmarks.
  • Make sure head contractors adopt the payment times and practices of the procurement policy through the supply chain.
  • Engage with businesses that adhere to payment best practices.
Ombudsman Kate Carnell says late payments can adversely impact small business subcontractors.
“Most government departments pay their invoices within 30 days, but when a prime contractor is appointed to manage a project there are regularly delayed payments further down the chain,” Ms Carnell said.
“Government agencies and prime contractors should ensure that payment terms and conditions throughout the supply chain are no worse than those in the head contract,” she said. The federal government supports shorter time frames for government payments (with amendments). But it only acknowledges other recommendations, such as making Project Bank Accounts compulsory for public works and construction projects.
overdue payments

Meanwhile Queensland addresses overdue payments to boost subcontractor rights:

Construction workers in Queensland can soon look forward to stronger payment security. State Parliament passed the Building Industry Fairness (Security of Payment Act) in October 2017. Key changes include:
  • A payment claims process that enforces progress payments.
  • Mandatory Project Bank Accounts to stop companies from withholding payment to finance other projects.
  • Strict penalties and disciplinary action for not honouring a payment claim with a schedule.
  • A new offence for not including mandatory conditions in a building contract.
Some aspects have been slammed, such as the fact that Project Bank Accounts don’t extend to subcontractors in civil construction. But this reform is generally viewed positively, especially when compared to the rest of the Australian construction industry, which lags behind. (You can read about other Queensland construction initiatives)