More protections needed for subcontractors: MEA

Master Electricians Australia (MEA) is advocating for a national scheme, similar to the government’s Fair Entitlements Guarantee (FEG), to ensure electrical subcontractors are fairly paid when a head contractor becomes insolvent.

As a way of addressing this problem, the Master Builders Association has announced that it will collaborate with a platform called Paid to manage payments between builders and subcontractors. However, MEA CEO Kate Raymond said that this sort of measure would not comprehensively protect subcontractors when a builder goes bust, and a better solution is to establish a scheme to protect subcontractor payments.

“MEA is deeply concerned about the increasing number of insolvencies that are occurring in the building industry and the number of electrical subcontractors not receiving payment for work conducted,” Raymond said.

“What is required is a better system and assurance of payment to subcontractors who have undertaken work but not been paid following builder insolvency. A contractual payment platform will not provide subcontractors with the payment protection they need.”

Raymond said that nothing had yet worked to secure payments to subcontractors following builder insolvency, with project trust accounts in Queensland not resulting in full payments flowing to subcontractors when an insolvency occurs.

“There are a multitude of payment apps and platforms, but many require subcontractors to pay a percentage of their payment through the platform. People shouldn’t have to forego their margin just to get paid,” Raymond said.

“These platforms typically see payments only flow through if the owner pays the builder and the builder verifies the payment as owing to the subbie,” she continued.

“MEA is concerned that the MBA approach could lead to a ‘pay when paid’ scenario, leaving subcontractors waiting months for owner milestone payments to become due to be paid what they’re owed.”

Raymond said MEA supported the government’s intention to provide a harmonised system in line with recommendations made in the 2018 Review of Security of Payment Laws report.

“MEA supports the federal government developing a scheme similar to the Fair Entitlements Guarantee which protects workers when an employer becomes insolvent,” she said.

“A FEG-like scheme for payments following insolvency, combined with a retention trust scheme with rapid adjudication frameworks and a harmonised set of security of payment legislation that is consistent across Australia, would go a large way to addressing the very serious issue of subcontractor non-payment,” she concluded.

MEA’s recent policy paper, ‘Security of Payment: Bigger Steps and Better Ways’, can be accessed here: https://www.masterelectricians.com.au/wp-content/uploads/2024/05/Security-of-Payment-Bigger-Steps-Better-Ways-230524.pdf.

Image credit: iStock.com/Taha Kara