Corrinne McLeish

This article is relevant to NEC4 ECC contracts in the UK where Y(UK)2 applies.^[1] That is the payment setup in which many project teams are typically working under, so it is worth being clear about that from the start. Under that payment process, the dates matter, the notices matter, and getting either wrong can cause a much bigger headache than most people think.

At first glance, the process looks simple enough. There is an assessment date. The Contractor applies before that date. The Project Manager certifies within a week. The due date follows. Then comes the final date for payment. If the paying party wants to pay less than the amount in the certificate, it must issue a Pay Less Notice in time and explain sufficiently how it got to its figure. Seems straightforward on paper. Less fun when someone misreads the calendar on a Friday afternoon though!

And this is not a one-off problem. HKA’s latest CRUX report shows that cashflow and payment issues still affect more than one in seven projects worldwide, and more than one in four megaprojects. ^[2] So this is not just contract admin for the detail-loving few, it is a real business risk.

Why this matters to more than lawyers

It may be easy to think of a Pay Less Notice as administrative paperwork. It is not. It is basic project control and getting it wrong can become a significant headache for all involved.

If the notice is managed properly, it protects the paying party’s position and keeps the conversation where it should be – on the core value of the work. If not, the project can quickly slide into a dispute that has little to do with the actual value and everything to do with someone missing a deadline or issuing a notice that makes no sense. That is an expensive way to learn the importance of clear commercial project control.

That is why Pay Less Notices are not something to leave to the legal team. On most projects, the real difference is made by the Project Managers, commercial teams and operational leads who are running the payment cycle day-to-day. By the time the lawyers are asked to step in, the damage is often already done.

The NEC4 payment cycle: Simple on Paper, easy to get wrong

The basic NEC4 ECC payment cycle under Y(UK)2 is not hard to follow.^[3] But it does demand precision.

The assessment date is set in the Contract Data. The Contractor applies before that date. The Project Manager certifies within one week. The due date is seven days after the assessment date. The final date for payment is 14 days after the due date unless the Contract Data changes it. The Pay Less Notice deadline is then worked out by counting back seven days from the final date for payment.

Many teams think of that as Day 0, Day 7, Day 14, and Day 21. That is helpful, but only if everyone is counting from the right date. One of the most common mistakes is counting from the application date instead of the final date for payment. It sounds small but it is not. In payment terms, small mistakes have a habit of growing legs.

What a pay less notice actually needs to do

A Pay Less Notice has a simple job. It needs to state:

• Clearly what amount the payer says is due; and
• How that amount has been worked out with details of the calculation provided with the Pay Less Notice and/or reference to a supporting document.

That means the notice should be clear enough that the other side can understand it without playing Sherlock Holmes. If the payer says the amount due is £0, the notice should say £0 clearly. Not hint at it. Not hide it in a spreadsheet. Not expect the reader to work it out from a list of deductions.

It is also practical to label the notice properly. Yes, the courts will look at substance as well as labels, but clear labelling still helps. If you mean “Pay Less Notice,” say “Pay Less Notice.” Life is hard and busy enough without documents playing hide and seek.

Where “smash-and-grab” fits in

The phrase “smash-and-grab” is commonly used to describe a dispute that is won because the payment process has failed, typically because a valid payment notice or Pay Less Notice was not served in time. A failed Pay Less Notice is therefore a common route into that kind of dispute, but not the only one. A staggering 63% of claims are reported to fall into this category.^[4]

The important point is that a smash-and-grab dispute is not really about the ‘true’ value of the works. It is about the immediate consequences of a failed payment process. By contrast, a true value dispute is about the substantive valuation. In plain English:

• Smash-and-grab = “you got the administrative process wrong;” and
• True value = “let’s work out the real number.”

That distinction matters because the cases keep making the same point: if you want to argue about the right number, you still need to respect the payment process first.

What the cases continue to tell us

The Courts continue to reinforce the same message – if you want to protect your position on value, you must first protect your position on process. Here are some good examples:

• S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448: confirmed that a payer can go after the true value but not as a way of skipping over the earlier payment obligation. It also confirmed that a notice can rely on clearly identified supporting material instead of repeating every figure in the notice itself.
• M Davenport Builders Ltd v Greer & another [2019] EWHC 318 (TCC): reinforced much the same point. If there is a payment obligation arising out of an earlier adjudication, the paying party cannot simply dodge it by racing off to a later true-value adjudication. It must first make the payment required by the first adjudication.
• Bexheat Ltd v Essex Services Group Ltd [2022] EWHC 936 (TCC): here a late Pay Less Notice meant the payer had to pay the notified sum. ESG could not escape that result by pointing to a valuation argument from a different payment cycle. In short – late means late.
• Placefirst Construction Ltd v CAR Construction (North East) Ltd [2025] EWHC 100 (TCC): taking a practical approach, the court said that a Pay Less Notice was not automatically invalid just because it was sent before the payment notice deadline. It looked at what the documents were doing in substance, not just what they were called. That is useful, but it is not a licence for carelessness.

How to get it right without making it complicated

The good news is that this is not rocket science. The bad news is that it still requires attention.

• Own the dates: Someone on the project needs to know the assessment date, due date, final date for payment and Pay Less Notice deadline – not just the theory of it. They need to be in the diary, visible and actively managed by several people. Otherwise, one person being off sick could result in a very big commercial headache.
• Label the notice clearly: If it is a Pay Less Notice, call it that. It avoids arguments and saves time.
• Put the amount due on page one: If the payer says £0 is due, say £0. If the payer says £145,000 is due, say £145,000. Do not make the recipient hunt for the answer.
• Show your workings: A schedule or spreadsheet is fine if it is clear and easy to follow. The recipient should be able to see how the figure was reached.
• Link deductions to the contract and evidence: If money is being deducted there should be a clear reason with (ideally) reference to the contract and supporting material/contemporaneous evidence to back it up. Unsupported deductions are much easier to challenge.

Where teams usually trip up

Most payment disputes do not begin with a clever legal argument, a complex valuation issue, or a failure of technology. They often begin with ordinary human errors such as someone counting from the wrong date, someone sending a notice too late, someone assuming “finance is dealing with it” or someone attaching (or not!) a complicated spreadsheet that no-one can follow and hoping for the best.

Hope is not a payment strategy.

None of those mistakes sounds dramatic. They are ordinary mistakes with very non-ordinary consequences.

Technology, workflow tools and AI-enabled systems may help by flagging dates, prompting reviews and reducing the risk of missed deadlines but they are only controls, not substitutes for judgement. Someone still needs to understand the contract, verify the dates, check each and every notice, and own the decision being made.

Takeaway point for leaders

The real lesson here is not “be more careful.” It is bigger than that. On NEC4 ECC projects with Y(UK)2, payment discipline is a leadership issue. It sits right in the middle of contract administration, governance and cashflow control. If senior leaders treat it as low-level paperwork, they should not be surprised when it turns into a very high-level problem.

At our recent Infrastructure & Construction roundtable at the RICS London offices with senior female leaders in construction we discussed the IWD 2026 theme of ‘Give to Gain’.^[5] I raised the importance of ensuring that the teams on the ground are properly prepared and knowledgeable about why a Pay Less Notice really matters. This responsibility cannot sit solely with the legal or commercial teams. It has to come from the top down. Senior leaders need to set the expectation that payment notices are a core part of commercial governance, make sure teams are sufficiently trained, and insist that contract administration is treated with the same discipline as programme and cost reporting.

The teams that usually avoid these disputes are not necessarily the most legalistic. They are the ones that do the basics well. They own the payment calendar. They use a clear notice template. They train the people closest to the job. They make the numbers easy to follow. None of that is flashy but all of it works.

A Pay Less Notice under NEC4 ECC with Y(UK)2 is not just another box to tick in the monthly payment cycle. It is a quick test of whether the project team is on top of the contract or chasing after it. In a market where payment issues still affect a substantial chunk of distressed projects, that is not a technical detail, it is a leadership issue.

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References

[1] Y(UK)2 clause incorporates the UK HGCRA 1996 (as amended)

[2] HKA, CRUX Insight Eighth Annual Report – From Insight to Foresight (November 2025): https://www.hka.com/crux-insight/

[3] NEC4 ECC Core clauses 5

[4] Kings College London, 2024 Construction Adjudication in the United Kingdom: Tracing trends and guiding reform, Professor Renato Nazzini & Aleksander Godhe; page 9

[5] https://www.hka.com/article/from-challenges-to-solutions/

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About the author

Corrinne McLeish is a Chartered Quantity Surveyor with over 20 years’ experience in construction, including eight years specialising in dispute resolution. She is an experienced quantum expert, appointed as expert witness eight times and supporting named experts on more than 30 occasions across arbitration, adjudication, litigation, and mediation, on disputes valued up to £197 million.

Corrinne brings strong frontline commercial insight, with deep expertise in contract and commercial management, NEC, and UK statutory adjudication. She holds a master’s in construction law, arbitration and adjudication, is a Fellow of RICS and CIArb, a member of the Adjudication Society, and a Senior Associate of the Academy of Experts. She is actively involved in professional and STEM initiatives, combining technical rigour with a pragmatic, project‑led approach.

How HKA can help?

At HKA, we regularly see the consequences of failed payment processes long before they reach adjudication or the courts. We are appointed on NEC4 projects to review payment cycles, assess the validity of Payment and Pay Less Notices, and support project teams in regaining control of cashflow before disputes escalate.

Our construction experts, quantum specialists, and contract advisors support both employers and contractors to:

• Review NEC4 payment processes and notice compliance.
• Stress‑test Pay Less Notices before they are issued.
• Respond effectively to smash‑and‑grab claims.
• Embed robust payment discipline into live projects.

If you would like to discuss how your NEC4 ECC payment processes operate in practice, or would value an independent review of your Pay Less Notice procedures under Y(UK)2, we would be happy to talk.