The Fair Payment Code explained for UK Construction Buyers

The Fair Payment Code is the UK Government’s new voluntary standard for payment practices, replacing the Prompt Payment Code as of December 2024. Administered by the Office of the Small Business Commissioner (OSBC), the Fair Payment Code introduces a tiered award system (Gold, Silver, and Bronze) to recognise businesses that pay their suppliers on time and treat them fairly. 

This affects main contractors, public sector buyers, and subcontractors alike. Main contractors and public sector buyers must ensure timely payments to subcontractors, in accordance with the terms outlined in the Procurement Act for public sector contracts. Meanwhile, subcontractors benefit from getting paid on time and avoid anxiety of when their next payslip will arrive. 

This blog explains: 

• The difference between the Prompt Payment Code and Fair Payment Code 
• Why the Fair Payment Code was introduced 
• The Office of the Small Business Commissioner (OSBC)’s Tiered Award System 
• Benefits of complying with the Fair Payment Code 
• Risk if you don’t comply with the Fair Payment Code 
• How Constructionline can help you monitor supply chain risk and make sure you’re working with reliable partners

What is the difference between the Prompt Payment Code and the Fair Payment Code? 

The primary difference is structure. The former Prompt Payment Code was a binary pass/fail model. The Fair Payment Code introduces a tiered recognition system designed to incentivise continuous improvement in payment culture. 

While the Prompt Payment Code was withdrawn in November 2024, the Fair Payment Code retains the core objective of protecting small businesses from cash flow issues caused by late payments. However, former Prompt Payment Code signatories do not automatically transfer; organisations must apply specifically for Fair Payment Code certification.

Why was the Fair Payment Code introduced? 

The government introduced the Fair Payment Code to: 

• Move beyond compliance: Shift from a basic compliance model to an aspirational tiered system. 
• Increase transparency: Provide public recognition for companies with excellent payment histories. 
• Protect smaller businesses: Ensure liquidity for SMEs, which account for 99.9% of UK businesses¹. 

Late payment remains a critical issue in the UK construction sector. 2025 data² shows approximately 62% of small businesses report receiving late invoice payments, with the average debt owed reaching £21,400 per firm. 

Overall, it aims to protect SMEs’ financial viability. With as many as 5.7 million SMEs in the UK, and 18.5% comprised of construction businesses in 2025³, it’s imperative they are protected from being paid late, especially when the industry is already so volatile with crushing insolvency ratesⁱ (3,950 November 2024-2025). 

As a construction buyer, it is up to you to ensure subcontractors are paid on time, in line with the Fair Payment Code, as well as items of the Procurement Act covering prompt payment terms.

How does the Tiered Award System work? 

The Fair Payment Code is overseen by the Office of the Small Business Commissioner (OSBC). To achieve certification, Main Contractors must meet specific criteria⁴ based on the speed of invoice settlement: 

• Gold Award: 95% of all invoices paid within 30 days. 
• Silver Award: 95% of all invoices paid within 60 days, AND 95% of invoices to small suppliers (under 50 employees) paid within 30 days. 
• Bronze Award: 95% of all invoices paid within 60 days.
   

What are the benefits for Main Contractors and Public Sector Buyers? 

Becoming a signatory to the Fair Payment Code offers significant commercial advantages, particularly for Main Contractors bidding for government work.

1. Eligibility forgovernmentcontracts 

Demonstrating prompt payment compliance is often mandatory for central government tenders valued over £5 million. Achieving Gold or Silver status provides verified evidence of compliance with the Procurement Act 2023, which mandates 30-day payment terms in public sector supply chains.

2. Strengthenedsupplychain relationships 

Supply chain stability is paramount. By adhering to the Fair Payment Code, Main Contractors and Public Sector Contracting Authorities demonstrate financial reliability. This positions you as a “client of choice,” ensuring you can secure the best subcontractors even during periods of high demand.

3. ESG andreputationalvalue 

Payment practices are a key metric in Environmental, Social, and Governance (ESG) reporting. Fair Payment Code certification publicly validates your commitment to ethical business practices, enhancing your reputation with investors and clients. 

What happens if you do not comply with the Fair Payment Code? 

Although voluntary, the Code carries significant weight. The OSBC has the authority to investigate complaints regarding poor payment practices. 

Consequences of non-compliance include: 

• Public Delisting: Removal from the Fair Payment Code register, which is publicly viewable. 
• Reputational Damage: Loss of standing within the industry and potential negative press. 
• Procurement Exclusion: Inability to bid on major public sector contracts where Code compliance (or equivalent performance) is a prerequisite.

Oversee your supply chain with Constructionline 

Managing payment performance across a vast construction supply chain can be complex. Constructionline provides the tools necessary to monitor subcontractor compliance and streamline construction procurement processes: 

Advanced datasets available on Risk Radar 

Risk Radar allows you to monitor the financial stability of your supply chain partners to minimise your financial supply chain risk. By assessing credit ratings and financial health, you can identify potential bottlenecks before they impact project delivery or payment cycles. 

Monitor and mitigate risk with our Supply Chain Management solutions 

Our construction supply chain management platform centralises your supply chain data, granting you access to over 30,000 verified subcontractors. 

• Find compliant partners: Easily filter for subcontractors who meet your specific compliance and financial standards. 
• Streamlined onboarding: Reduce onboarding time using our existing network and data, ensuring that new suppliers understand your payment procedures and invoicing requirements from day one – a key requirement of the Fair Payment Code. 

Key takeaways 

• Purpose of the Fair Payment Code: The Code establishes clear standards for prompt, transparent, and fair payment practices throughout the construction supply chain. 
• Tiered Award System: Organisations are recognised through a multi-tier award structure, reflecting their commitment to best-in-class payment performance and ongoing compliance. 
• Benefits of compliance: Adhering to the Code enhances eligibility for public sector contracts, supports supplier relationships, and demonstrates a commitment to industry best practice. 
• Risks of non-compliance: Failure to comply with the Code may limit access to contracts, damage reputation, and impact supplier trust within the supply chain. 

Frequently Asked Questions 

Q: Do existing Prompt Payment Code members automatically transfer to the Fair Payment Code? 
A: No. The Prompt Payment Code was withdrawn in November 2024. All organisations must submit a new application to the OSBC to become signatories of the Fair Payment Code. 

Q: Is the Fair Payment Code mandatory for construction companies? 
A: The Code is voluntary. However, compliance is often a requirement for winning government contracts and is considered industry best practice for maintaining a healthy supply chain. 

Q: Who administers the Fair Payment Code? 
A: The Code is administered by the Office of the Small Business Commissioner (OSBC) on behalf of the Department for Business and Trade.