Surety Bonds

Payment Bonds for Contractors — Protecting Your Supply Chain

Payment Bonds for Contractors — Protecting Your Supply Chain — everything contractors need to know about surety bonds.

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What Payment Bonds Guarantee and Why Subcontractors Rely on Them

Surety bonds are a required part of doing business for most licensed contractors. Whether you need a license bond to operate legally, a bid bond to compete for public projects, or a performance bond to secure a major contract — Trade Safe helps contractors get bonded fast at competitive rates.

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What a Payment Bond Guarantees

A payment bond guarantees that the GC or prime contractor will pay all subcontractors, suppliers, and laborers who work on the project. If the GC defaults and doesn’t pay, subs and suppliers can make a claim against the payment bond — protecting them from non-payment even when the GC fails.

Federal and State Requirements

The federal Miller Act requires payment bonds on all federal contracts over $150,000. State Little Miller Acts impose similar requirements on state-funded projects — thresholds vary from $25,000 to $200,000 by state. Many commercial owners now require payment bonds on private projects as well.

Who Can Make a Payment Bond Claim

Subcontractors in direct contract with the prime contractor, material suppliers furnishing materials incorporated into the project, and in some jurisdictions, sub-subcontractors and lower-tier suppliers can make payment bond claims. The Miller Act requires claimants to give notice within 90 days of last furnishing labor or materials.

Payment Bond Cost

Payment bonds are almost always issued together with performance bonds — the combined premium is typically 0.5–3% of contract value, covering both bonds. Very rarely is a payment bond issued without a corresponding performance bond. The combined bond package is what contractors typically obtain.

Protecting Yourself as a Subcontractor

If you’re a subcontractor on a bonded public project, the payment bond is your primary protection against non-payment by the GC. Verify the bond exists at project start, understand the claim notice requirements, and don’t miss the filing deadline if you’re not getting paid.

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Frequently Asked Questions

Can subcontractors make a payment bond claim?

Yes — payment bonds specifically exist to protect subcontractors and suppliers. A sub who isn’t paid by the GC can make a claim against the payment bond for the unpaid amount, up to the bond limit.

What is the Miller Act notice requirement?

Under the federal Miller Act, subs not in direct contract with the prime must give written notice of their claim within 90 days of last furnishing labor or materials. First-tier subs (direct contracts with prime) have longer deadlines. Missing notice requirements forfeits your claim rights.

Does a payment bond protect me from owner non-payment?

No — payment bonds protect subs from GC non-payment, not from owner non-payment to the GC. If the owner doesn’t pay the GC for legitimate work completed, the GC’s cash flow problem becomes yours. Mechanics lien rights are the primary protection against owner non-payment.

Are payment bonds required on private projects?

Not by law on most private projects, but many sophisticated private owners require them. In some states, private projects above certain values require payment bonds by statute. Check your project contract and your state’s lien law for requirements.

How much can I claim on a payment bond?

You can claim up to the amount owed to you under your subcontract, including labor, materials, and equipment directly incorporated into or used on the project. Profit margins on uncompleted work and consequential damages may not be recoverable.

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