What is the interest rate specified by the prompt pay act for overdue payments to subcontractors?

The correct interest rate specified by the Prompt Pay Act for overdue payments to subcontractors is 1.5%. This rate is particularly designed to ensure that subcontractors receive timely payments for the work they’ve performed, reflecting the importance of cash flow in the construction industry. By establishing a clear interest rate for overdue payments, the Prompt Pay Act serves to incentivize prompt payments and protect subcontractors from financial strain due to delays.

In this context, it is essential to understand that a rate above 0% acknowledges the value of money over time and the impact of delayed payments on subcontractors. A rate of 10% or 15% is significantly higher than what is outlined in the law, which means those options do not align with the legislative intent of the Prompt Pay Act. Therefore, 1.5% is the appropriate and legally stipulated rate that addresses concerns of fairness and timeliness in financial transactions within the construction industry.