What is set off/contra charging in the context of a construction contract?

Contra charging refers to a reversal of the process where money flows from the employer to the contractor for work carried out. Sometimes, the employer needs to recover costs from the contractor. This is also called set off.

Section111 of the Construction Act, as amended in 2011, states that contra charging must be made clear. Withholding of money must not be confused with a dispute over valuation. Therefore, any contra charge must comply with the pay less terms of the original contract.

The Pay Less Notice must detail how much the contra charge is, the sum to be withheld, and the amount to be paid. It is the employer’s responsibility to make this deduction from the final account.