A contra charge recovers a subcontractor's default from money you owe them — but only if it's contractual, notified, and evidenced. Here's how to do it so it sticks.
Every contractor has been here. The plasterer's left before the snags are done, the following trade can't start, and you end up paying your own labour to finish someone else's work. Or the groundworker's damaged a drainage run the next gang has to dig up and redo. Or you're paying for a skip a week because one subcontractor won't clear their waste.
That cost is real, it's not yours to carry, and the mechanism for recovering it is the contra charge — money you deduct from what you'd otherwise pay a subcontractor, to cover a cost you've incurred because of their default.
Simple in principle. Where it goes wrong is in the execution. A contra charge raised properly is watertight and gets accepted. A contra charge raised badly is an invitation to a dispute, a soured relationship, and — if it goes to adjudication — a deduction you have to pay back with the other side's costs on top.
A contra charge (or "back charge") is a set-off. You owe the subcontractor money for the work they've done. They owe you money because their default has cost you something. You net the two off and pay the balance.
The costs that typically get contra-charged:
The right to do this isn't automatic. It has to come from somewhere, and it has to be done in the right way at the right time. Get either wrong and the deduction fails.
I've seen more contra charges collapse than succeed, and it's almost always for one of three reasons. Get all three right and you're on solid ground.
The right to set off has to exist in the subcontract. Most standard subcontracts give you a right to recover costs arising from the subcontractor's default, but you need to know what yours actually says — the clause, the conditions, and any notice requirements attached to it. If you're working on a bespoke or amended subcontract, read it before you deduct, not after.
If there's no contractual right and no agreement, you're relying on common-law set-off, which is harder to sustain and easier to challenge. Don't build your recovery on the weakest available footing.
This is where most contra charges die. Under the Construction Act, if you're going to pay a subcontractor less than the sum notified as due, you generally need to issue a valid pay-less notice, in the right form, within the contractual timeframe before the final date for payment. Miss the notice or miss the deadline, and you can be obliged to pay the full amount regardless of how good your underlying case is — then chase the contra separately, from a far weaker position.
The discipline is simple: the moment you know a cost is coming, notify it. In writing. Early. Don't save it up for the final account as a surprise — that's the single most common way to turn a legitimate deduction into a fight. A subcontractor who's been told at the time that a charge is coming, and why, rarely disputes it. One who finds a £4,000 deduction on their final certificate with no warning always will. See our guide on payment applications under the Construction Act for how the notice regime works.
A contra charge is a claim, and like any claim it needs proof. That means:
Inflate the number, skip the evidence, or fail to connect it to their specific default, and you've handed the subcontractor everything they need to reject it.
Here's the part the contract doesn't cover.
The subcontractor you're contra-charging on this job is very likely one you'll want back on the next one. The specialist trades that are worth having are in demand, and they talk to each other. A reputation for springing surprise deductions at the final account will cost you good subcontractors faster than any single contra charge will ever recover.
So the judgment isn't just "am I contractually entitled?" It's "is this worth it, and am I handling it in a way that keeps a working relationship intact?" Often the answer is to pick up the phone before you put anything in writing — tell them there's a problem, that it's cost you, and that you'll be raising a charge, and give them the chance to put it right themselves or agree the number. Half the contra charges I've seen turn into disputes did so purely because the first the subcontractor heard of it was a deduction, not a conversation.
That's not going soft. You still raise the charge, you still document it, you still issue the notice. But being contractually correct and being commercially smart aren't the same thing, and the best contracts managers know how to be both at once. A contra charge is a tool, not a weapon. Use it to recover a genuine cost, not to punish or to squeeze.
At Construction AI, contra charges live where they belong — against the subcontractor's account, tracked through the payment application and variation workflow rather than remembered in someone's head or buried in an email. The charge, the reason, the evidence and the notice all sit together, so when the final account comes round there are no surprises on either side — which is exactly the point. The cleanest contra charge is the one the subcontractor saw coming and already agreed.
Recover what's genuinely yours. Base it on the contract, notify it in time, evidence it properly, and tell the subcontractor before they find it. Do that and the deduction holds — and you keep a subcontractor you'll want back.
What is a contra charge in construction?
A contra charge (or back charge) is a deduction a contractor makes from money owed to a subcontractor, to recover a cost the contractor incurred because of the subcontractor's default — such as defective work, damage, cleaning, or delay.
Can I deduct a contra charge from a subcontractor's payment?
Only if you have a contractual right of set-off and you follow the payment rules. Under the Construction Act, deducting less than the notified sum usually requires a valid pay-less notice issued in the correct form and within the contractual timeframe. Without it, you may have to pay in full and recover the charge separately.
What evidence do I need for a contra charge?
Proof the cost is genuine and quantified (actual labour, plant, and material costs, not estimates), documentation of the default (photos, site diary entries, correspondence), and a clear link showing the cost arose because of the subcontractor's specific default.
When should I raise a contra charge?
As soon as you know the cost is coming — notify it in writing early. Raising contra charges as a surprise at the final account is the most common cause of disputes and often makes an otherwise valid deduction fail.
What's the difference between a contra charge and a variation?
A variation changes the scope or value of the work and adjusts what's due. A contra charge recovers a cost caused by the other party's default and is set off against what's due. They're tracked differently and shouldn't be confused.
Stephen Mckenna MCIOB
30+ years in UK commercial construction, from site management to director level. Now building the project management tools he wished he'd had.
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