Daywork Contracts in UK Construction: Guide for Contractors & Clients

A daywork contract is a payment mechanism in which the client reimburses the contractor for all material, labour and plant costs, plus an agreed markup. The project Quantity Surveyor (QS) typically checks and signs off each claim.

Unlike lump-sum, re-measurement or cost-plus contracts, daywork contracts reflect the actual time spent and resources used on a project rather than a fixed fee. Clients and contractors often rely on this arrangement when they cannot define the scope of work clearly, when the project programme remains uncertain, or when changes will likely arise. For projects with high uncertainty, daywork contracts provide greater flexibility and transparency for both parties.

Read on to learn how daywork contracts work in the UK, when to use them, and their advantages and disadvantages for contractors and clients.

When to Use Daywork Contracts

Construction professionals generally treat dayworks as a last resort. However, they are most appropriate in scenarios such as:

• Workers uncover uncharted Victorian pipework during street works in Islington
• An unexpected archaeological find stalls progress on a heritage site in York
• Emergency highway repairs become necessary after a storm

In these scenarios, detailing and pricing every variation in advance would delay the programme. Instead, dayworks let the team press on while they record costs transparently.

How Daywork Contracts Work

Under a daywork contract, a client reimburses a contractor for all materials, plant and labour hours, along with the agreed markup. Consequently, the contractor submits a tender that includes a schedule of rates – covering labour, plant, materials and any subcontractor rates – plus the markup.

Remember, daywork contracts don't give contractors a blank cheque. Although they mirror the actual resources consumed, the client and contractor still establish an estimate reflecting the known scope at the outset.

Sometimes, a daywork contract includes a maximum limit (a 'not-to-exceed' or NTE clause), for example, £500,000 + VAT. This cap limits the client's financial liability and guides the contractor when managing project financials.

Cost Categories

When Clients Use Dayworks

Clients and main contractors typically use dayworks when a project’s scope is not well defined or when the programme is unknown.

After reviewing the known scope, the contractor will:

• Determine loaded labour rates, including wages, overheads and profit
• Identify and price required materials, including freight and markup
• Provide an estimate of labour hours, plant hours and materials

Contractors often favour dayworks because they are easy to negotiate, minimising financial risk. If conditions change, the contractor consults the client to update the project cost estimate.

Day-to-Day Process

To manage dayworks effectively, teams should follow these daily steps:

1. Complete a daywork sheet each day – recording labour hours, plant, materials and location
2. Obtain the site QS or client representative's signature on the sheet before close of play
3. Submit sheets weekly for valuation
4. Hold a weekly spend review meeting to track cumulative cost against any NTE allowance

A compliant UK daywork sheet should show project details, operative names, plant hours, material quantities, and authorised signatures. Teams often follow the CECA Dayworks Schedule for rates.

Benefits of Daywork Contracts

Now that we've covered how daywork contracts function, let's examine their advantages. Daywork contracts offer the following benefits for both owner-developers (clients) and contractors:

For Both Parties

• Simplicity

  Once parties agree on labour, plant and material rates, work can begin quickly because the contractor faces less financial risk than with many other contract types.

• Flexibility

  Clients can adjust the scope and direction of the project as it progresses without renegotiating the entire contract.

• Transparency

  The contractor provides detailed cost data, enabling the client to monitor the budget and progress.

• Tender Review

  A simple pricing structure – labour, plant and material rates – makes tenders easy to compare.

For Contractors

Beyond the shared advantages, contractors gain specific benefits from daywork arrangements:

• Straightforward Compensation

  Contractors receive reimbursement for all work performed and costs incurred, including unforeseen tasks, providing financial security.

• Decreased Burden Before Construction

  Minimal preconstruction effort reduces upfront workload.

• Opportunity to Build Long-term Relationships

  Transparency can strengthen client relationships, opening doors to future work.

• Profitability

  Correctly calculated markup rates help maintain profitability.

In summary, clients tackling projects with an unpredictable scope gain the flexibility they need to manage unforeseen events. Meanwhile, contractors have confidence they will recover costs for time and materials.

Drawbacks of Daywork Contracts

Despite their advantages, daywork contracts also present challenges. While they offer transparency and simplicity, they lack a defined budget and require detailed cost tracking. To mitigate these disadvantages, both parties should craft a robust contract, build trust and communicate openly. Drawbacks include the following:

For Both Parties

• No Established Budget

  Uncertain scope means greater financial risk.

• Requires a Trusted Partner

  Without trust, clients may suspect contractors of inflating hours.

• Offers No Incentives for Efficiency

  Payment for hours worked can reduce motivation to work efficiently.

For Contractors

• Requires Detailed Cost Tracking

  Contractors must provide a full cost breakdown, demanding a capable financial system.

• Upfront Financial Burden

  Subcontractors may struggle with cash flow until they receive reimbursement.

• Difficulty Managing Client Expectations

  Undefined scope hampers early cost forecasting.

Reducing the Pitfalls

Fortunately, there are several ways to reduce the pitfalls of a daywork contract:

• Build on an established relationship: Trust enables rapid problem-solving on site while assuring the client of fair charging
• Add an NTE clause: Capping the cost (e.g., £500,000 + VAT) lowers client risk and clarifies expectations
• Establish clear communication: Open channels help solve issues before they escalate

Daywork Contract Example

To illustrate how dayworks function in practice, consider the following scenario:

A large retail company asks ‘Joe Bloggs Construction’ to renovate a store in Manchester that was recently damaged by a storm. Keen to reopen quickly, the client proposes a daywork contract.

Using estimating software, Joe Bloggs calculates loaded labour rates, wages, overheads, markup and material unit prices. The parties negotiate and sign the contract, referencing standard JCT 2016 (clause 5.7) for dayworks and including an NTE of £350,000 + VAT.

Joe Bloggs' team mobilises rapidly with trusted subcontractors. Each evening, the site supervisor completes a daywork sheet, which the client's QS signs before leaving the site. Weekly, the QS validates the sheets and updates the running total.

Mid-project, the company discovers storm-related water damage behind the façade, requiring additional remedial work. Thanks to the daywork arrangement, they record the extra hours and materials, inform the client, and continue without delaying the programme.

Once construction completes, Joe Bloggs Construction compiles all daywork sheets, invoices and timesheets. The client inspects the work, reconciles costs against the NTE, and approves final payment. Both parties meet their objectives: swift mobilisation, transparent costing and a profitable outcome.

Role of the Quantity Surveyor

Throughout the daywork process, the QS plays a crucial role in maintaining accuracy and trust. The QS:

• Verifies each daywork sheet
• Cross-checks rates against the tender or CECA schedule
• Signs sheets to confirm value
• Flags trends during weekly reviews to prevent budget overrun

This independent validation limits disputes and builds confidence on both sides.

Common Mistakes to Avoid

Even with the best intentions, teams can make errors that undermine daywork contracts. Watch out for these common pitfalls:

• Late or incomplete daywork sheets – get them signed daily
• Using unagreed rates – stick to the tender schedule
• Poor communication – hold that weekly review meeting
• Ignoring VAT rules – charge VAT per HMRC Notice 708; apply CIS reverse-charge where required

Contract Formation Determines Success

Understanding the intricacies of key contract types can significantly impact project success for both clients and contractors. The negotiation stage lets both parties align priorities and reach a low-risk agreement.

Under JCT 2016 (clause 5.7) or NEC4 (clause 63.10), a well-defined daywork clause enables transparent valuation, effective communication and quality delivery – even when conditions are uncertain.

Key Takeaways

• Dayworks pay actual cost plus overhead and profit – nothing more
• Use them only when the scope proves unforeseeable and speed matters
• A QS-signed daywork sheet is non-negotiable
• Weekly cost reviews keep spend within any NTE cap

FAQs

What does a daywork rate include?

A daywork rate includes labour (loaded), plant, materials and an agreed overhead and profit percentage.

What are 'Day 2' works in construction?

Day 2 works refer to follow-on tasks after Practical Completion. Teams often value these on daywork rates because the scope is unknown at handover.

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