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July 18, 2018

Calls for prompt-payment legislation for contractors in British Columbia

 

When was the last time you bought groceries and told Save-On Foods that they would have to wait a couple of months before you would pay them? It would never fly. Trade contractors in British Columbia — those who build the structures in which you live, work, play and study — must also pay their expenses on time. But to get paid for their completed work, they must routinely wait and wait and wait.

Waiting long periods to be paid leads to cash-flow problems for companies that are mostly small- to medium-sized enterprises and are often family-run. Squeezed cash flow discourages hiring, training and investments in productivity improvements such as technologies. Badly needed apprentices are not taken on and business that could grow, don’t.

Because the practice of delaying payment has been going on so long, it has become standard in the construction industry. “Pay-when-paid” contract clauses are now considered normal. The trades are often forced to accept these terms or lose the job.

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Construction is a high-risk business and payment delays have the effect of shifting the risk down the chain of payment. Trades end up bearing the burden of financing construction projects. They must build this risk into their bids which drives up the cost of construction. Nationally, as much as $46 billion, at current volumes, remains unpaid past a 30-day period, keeping that money out of economic circulation.

We know general contractors are often waiting to be paid themselves, but shifting payment delays onto the trades means more risk is being taken by the little guys, those likely least able afford to it. All too often, this cash-flow crunch leads to personal hardship, including bankruptcies. If you are a tradesperson, this translates into bounced paycheques and/or absence of benefits like health insurance and pensions.

B.C. needs prompt-payment legislation to ensure contractors and subcontractors are paid in a timely way, within 30 days. It’s only fair. While payment delays are not unique to construction, the impact is significant. Construction represents 8.6 per cent of GPP and nine per cent of the provincial workforce so when construction contractors are not paid, the economy suffers. The issue is, or ought to be, politically neutral because if implemented, everybody wins, including the B.C. economy.

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