Plain-English guide to Illinois's Contractor Prompt Payment Act for owners, contractors and subs, with slides, who is covered, pay deadlines and retainage caps.
Last reviewed October 29, 2026 · General information, not legal advice
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The Illinois Contractor Prompt Payment Act, at 815 ILCS 603, sets payment deadlines that every covered construction contract is deemed to contain, adds 10% yearly interest on late payments, and caps retainage, which is money held back until work is finished. It covers private work on Illinois real property. The parties enforce it through their contracts and court claims, not through a state agency. This page is for owners, general contractors and subcontractors.
Slide show: The Contractor Prompt Payment Act in seven slides
What it does
Illinois builds payment deadlines, late interest and a retainage cap into private construction contracts.
Who it covers
Owners, contractors and subcontractors on private jobs. Public-funds contracts, single-family homes and multi-family residences of 12 or fewer units in one building are excluded.
The owner rule
The owner pays within 15 calendar days after approving a payment application. It counts as approved 25 days after receipt unless the owner first sends a written statement of the amount withheld and the reason.
The flow-down rule
A contractor pays its subcontractor for accepted work within 15 calendar days after receiving each payment, and subcontractors pass money down the same way.
The retainage cap
Retainage is limited to 10% of each payment until the contract is 50% complete, then no more than 5% is held.
The penalty
Late amounts carry 10% interest per year, and an unpaid contractor can suspend work after 7 calendar days' written notice.
The tip
An owner who plans to withhold puts the amount and the reason in writing before day 25.
Who is covered
Question
Answer
Covered contracts
A contract or subcontract made after the Act took effect, for the design, construction, alteration, improvement or repair of Illinois real property.
Excluded: public money
Contracts that require spending public funds.
Excluded: homes
Single-family residences, and multiple-family residences of 12 or fewer units in a single building.
Who counts as a contractor
The meanings under the Illinois Mechanics Lien Act and court cases under it.
Size threshold
None in the text.
Built-in terms
Section 10 says every covered construction contract is deemed to provide the payment terms.
How it touches your taxes and payroll
The Act has no tax provision. Interest owed under it and retainage held back are contract balances. When retainage counts as income depends on federal and state income tax rules, which the Act does not address. Payments to subcontractors raise separate reporting questions, covered in our guide to contractors and Form 1099-NEC, and see also our page for construction and contractors.
