Unfortunately the most common answer to this question is ‘no’, but it doesn’t have to be. Think ahead.  

When contractors enter into contracts with employers they must be aware that unless the retention monies have been set aside in a formal legal trust the money is not protected if the employer goes into liquidation.

It is therefore essential that the contract has provisions within it which ring fence the monies, so that they will remain separate from the employer should the employer go into liquidation.

Employers will always seek terms within a contract which allows them us use the retention monies within their own cash flow, whilst contractors want the money to be ring fenced in case of the employer becoming insolvent.

This issue must be sorted out at very beginning before contracts are entered into and contractors are strongly advised to review the contract carefully to ensure that the monies are automatically held in a separate trust or separate bank account.

Given that profit margins are so low in this current economic climate, it is important that contractors do all they can to protect the retention monies, which in many cases represents the profit element from the job.