Two rules that decide when you get your money
Every progress payment on a construction job is shaped by two sets of rules. Retainage decides how much of each payment is held back, and for how long. Prompt payment laws decide how fast the owner has to pay the GC, how fast the GC has to pay its subs, and what interest runs when they don’t.
Both vary by state, and within a state they often differ between public and private work. A subcontractor with a 10% retainage clause may be working in a state that caps retainage at 5%. A GC that pays subs 30 days after it’s paid may be breaking a 7-day statute that carries 1.5% a month in interest. This tool puts the rule for your state next to your contract terms so you can see the gap.
How the tool works
- Choose the state and type of work. Public means state and local government work. Private means everything else. Federal work follows the same federal rules in every state.
- The rules on file appear: the retainage cap, how retainage is reduced or released, the prompt payment deadlines, and the interest rate on late payments, with the statutes they come from.
- Enter your contract value and retainage rate. The tool works out the retainage your contract holds and the most the cap allows, and flags anything over the cap.
- Work out interest on a late payment. Enter the amount and how many days late it is. When the statute sets a fixed rate the tool uses it; when the rate floats (for example, prime plus 1%) or there’s no rate on file, it uses the rate you enter.
Interest is simple interest: amount × annual rate × days late ÷ 365. A rate of “1% per month” is treated as 12% a year. The chart shows how interest builds as the payment gets later, and the table at the bottom lists the cap, sub payment deadline and interest rate for every state.
A worked example
A mechanical subcontractor has a $1,250,000 subcontract on a private office project in New York, with 10% retainage. The project is well over New York’s $150,000 threshold for its private prompt payment law.
| Amount | |
|---|---|
| Retainage held at 10% | $125,000 |
| Most allowed at the 5% cap | $62,500 |
| Held over the cap | $62,500 |
The contract holds $62,500 more than the statute allows. That’s working capital the sub is lending the project for free, often for a year or more. The right time to raise it is before signing, or at the next pay application once you’ve confirmed the cap applies to this contract.
The same sub is paid $48,500 for a pay application 45 days late. New York’s private prompt payment rate on file is 1% per month, 12% a year:
| Days late | Interest | Total with interest |
|---|---|---|
| 30 | $478.36 | $48,978.36 |
| 45 | $717.53 | $49,217.53 |
| 90 | $1,435.07 | $49,935.07 |
| 180 | $2,870.14 | $51,370.14 |
At $15.95 a day, interest won’t make anyone rich, but a written statement of interest owed under the statute tends to move a payment up the pile.
Using the rules in practice
- Read your contract against the statute. Many statutes override contract terms that hold more retainage or pay later than the law allows, but some allow the parties to agree otherwise. The statute citation tells you where to look.
- Ask for retainage reduction at 50% complete. Several states require it on public work, and it’s a common negotiated term on private work.
- Track release deadlines. Retainage release often has its own clock after substantial completion. Put it on the calendar along with your lien and notice deadlines.
- Invoice interest in writing. State the statute, the days late and the amount. The PDF from this tool is a clean backup.
- Check pay-when-paid clauses. Some states limit or void them, which changes when your payment is actually due.
Where the rules come from
Each state’s entry cites its public contract, retainage and prompt payment statutes, and federal work cites the Prompt Payment Act (31 U.S.C. 3901 to 3907) and FAR 32.103 and 52.232-27. These are plain-language summaries of the general rule as of the review date shown. Many rules have exceptions by agency, contract size or contract date, and rules change. Where we couldn’t confirm a single figure, the tool says Verify with state statute rather than guessing. The data is versioned; the review date is on the page and in the PDF.
Related tools
Retainage is one of the biggest drains on a subcontractor’s cash. See how much working capital it ties up on a job with the cash flow and retainage forecaster. Bill each period with retainage calculated line by line using the schedule of values and pay application builder, and keep your lien rights alive with the mechanics lien and notice deadline calculator.