What a work order to a subcontractor has to settle before work starts
Most disputes with a subcontractor are not disputes about work. They are disputes about what was agreed, argued months later between two people who each remember a different conversation. A work order is the document that makes that argument unnecessary, and it is worth writing badly rather than not at all.
This guide covers an area governed by tax or labour law, where rates, thresholds and prescribed formats change and vary by project type. It describes structure and process rather than quoting figures. Confirm anything that affects a filing with your CA or a labour law advisor before acting on it.
A work order is not a purchase order
The two are routinely confused because both authorise spending. A purchase order buys a quantity of a thing at a rate — twenty tonnes of steel, delivered. A work order buys an outcome produced by labour, and an outcome has to be described, measured and accepted before anyone can agree it has been delivered.
That difference is why a work order carries clauses a purchase order never needs: how the work will be measured, what happens when the scope changes, who supplies material, and what is held back until the defect period ends.
- Scope of workTrade · description
What is included, and in writing, what is not.
- Rate basisRate · unit · quantity
Lump sum, per unit, or a running account with no fixed value.
- Payment termsStage · % · trigger
Milestones or RA cycle, and the certifying authority.
- Retention & defect liability5% · 12 months
How much is held and for how long after handover.
- VariationsWritten approval required
How a change is priced and who may approve one.
- SignaturesContractor · Builder
Both parties, dated — an unsigned work order is a quotation.
The clauses that settle an argument before it starts
Each of these exists because its absence has cost somebody money. A work order that covers them is not long — most fit on two pages.
| Clause | What it prevents |
|---|---|
| Scope of work | Arguing later about whether something was included |
| Rate basis | Two different readings of the same number |
| Measurement basis | Disagreement about the quantity done |
| Payment stages | "When will I be paid" every week |
| Material supply | Both sides assuming the other was buying it |
| Retention | No leverage once the work is finished |
| Variations | Extra work done on a promise, billed on a guess |
| Defect liability | Nobody returning to fix a crack |
Rate basis: three kinds, and they behave differently
Lump sum fixes a single amount for a defined scope. It is the simplest to administer and the least forgiving of a vague scope — every ambiguity becomes a variation claim, because the contractor has no room anywhere else.
Item rate fixes a rate per unit — per square foot of plastering, per cubic metre of concrete, per running foot of skirting — and the amount follows from measurement. Scope ambiguity matters less; measurement discipline matters more.
A running account has no fixed total at all. It is used for open-ended work where the extent genuinely is not known at the start, and it is the one most often entered into without saying so out loud. Recording it explicitly is better than pretending a number exists: payments still flow normally, and the account is settled against measured work rather than against a total nobody believes.
Measurement is the clause most often left out
A rate per square foot is meaningless until both sides agree what is being squared. Plastering measured on the gross wall area and plastering measured with openings deducted are different numbers for the same wall, and the gap is not small.
The work order should name the method, the deductions that apply, and who takes the measurement — jointly, or by the site engineer with the contractor present. It should also say when: measurement taken before the next trade covers the work, because nobody is going to break open a finished floor to settle a reading.
Payment stages, retention and the leverage problem
Stage payments tie money to completed work rather than to the calendar. Each stage should be defined by something observable — slab cast and cured, blockwork up to lintel level, first coat complete across the floor — rather than by a percentage that each side estimates differently.
Retention exists because of what happens at the end. A contractor who has been paid in full has no commercial reason to return for snagging, and a polite request is the only remaining instrument. Holding back an agreed proportion until the defect liability period closes converts that request into a transaction.
The retention percentage, the defect period, and the date the balance is released all belong in the work order. A retention with no stated release date is a dispute scheduled for later.
Variations: the clause that gets used every single time
Scope changes on every project. The question is only whether the change was priced before it was built.
A variation clause should require written authorisation before the extra work starts, state how the rate is set — contract rates where the item exists, agreed rate where it does not — and say who can authorise. Without it, the normal sequence is: the client asks on site, the contractor obliges, and the amount is negotiated after the work is already in place, at which point the contractor has no leverage and the client has no comparison.
This is the clause worth enforcing even when enforcing it feels obstructive. A five-minute written confirmation is cheaper than the alternative.
Statutory deductions belong in the order, not in a surprise
Tax deducted at source, GST treatment, and labour-law obligations all affect what the contractor actually receives, and a contractor who discovers a deduction on the first payment will treat it as a reduction in the agreed rate.
Say in the order whether the rate is inclusive or exclusive of GST, that statutory deductions apply, and who bears registration and compliance obligations for the labour engaged. The rates and thresholds themselves change and vary by contract — confirm those with your CA rather than copying a number from a template.
Common questions
What is the difference between a work order and a purchase order?
A purchase order buys goods at a rate; a work order buys work, which has to be described, measured and accepted. Work orders therefore carry clauses a purchase order does not need — measurement basis, stage payments, retention, variations and defect liability.
Should a work order always have a fixed amount?
No. Where the extent of work genuinely is not known at the start, a running account is more honest than an invented total. Payments proceed as work is measured and the account settles against measured quantities. What matters is that the basis is stated rather than left ambiguous.
How much retention should be held?
There is no universal figure — it is negotiated, and varies by trade and by the length of the defect period. What matters more than the percentage is that the order names it, names the defect liability period, and names the date the balance is released.
Does a work order need to be on stamp paper?
Requirements for stamping and registration depend on the nature and value of the agreement and on state law. A clear written order signed by both parties is far better than nothing while you check; ask your CA or a lawyer what applies to the value you are working at.