You finished the work. The general contractor got paid by the owner. You did not get paid by the general contractor. On a bonded public job, that is the exact situation a payment bond exists to fix. It is the guarantee that the subs and suppliers who show up and do the work still get paid even when the money upstream stalls or disappears.
This guide covers what a payment bond actually protects, how it is different from a performance bond, when one is required, who pays for it, and how a claim works - including the notice and filing deadlines that cost contractors real money when they get missed. Plain English, from a team that places these bonds every week. If you would rather just talk it through, call (801) 505-5500.
A payment bond is a surety bond that guarantees the subcontractors, laborers, and material suppliers on a construction project get paid for their work. If the prime contractor does not pay them, those parties can file a claim against the bond and recover what they are owed. It protects the people downstream of the contractor, not the project owner.
That last point is what trips people up, so it is worth being precise. A payment bond does not protect the contractor who buys it, and it does not protect the project owner's investment in the building. It protects everyone the contractor is supposed to pay. The contractor posts it; the subs and suppliers benefit from it.
Notice who is not in that list: the subcontractors and suppliers. They are the parties the bond protects, but they are not a party to the bond itself. That is why the claim process has its own specific rules, which we cover below.
Payment bonds and performance bonds almost always show up together - they are usually issued as a single package often called a "P&P bond." But they protect completely different people against completely different problems.
Simple version: the performance bond makes sure the building gets built. The payment bond makes sure the people who built it get paid. For a full breakdown of the other side of the pair, read our guide to performance bonds for contractors.
On federal construction, payment bonds are governed by the Miller Act. Under the Federal Acquisition Regulation - the rules federal agencies actually apply - a contractor must furnish both a performance bond and a payment bond on any federal construction contract that exceeds $150,000. For federal construction contracts between $35,000 and $150,000, the contracting officer must require payment protection, and a payment bond is one of the accepted forms (along with alternatives like an irrevocable letter of credit).
One technical note contractors sometimes hear: the Miller Act statute itself references $100,000, but the FAR sets the practical bonding threshold at $150,000. For bidding purposes, plan around the $150,000 figure. For the underlying federal requirement, read our deeper explainer on the Miller Act.
Most states have their own version of the Miller Act - usually called a "Little Miller Act" - that requires payment bonds on state and local public works. The dollar thresholds, notice requirements, and claim deadlines vary from state to state, and they are not the same as the federal rules. Always read the bid documents for the specific project, and confirm the requirements for the state you are bidding in before you rely on any number.
Payment bonds are not just a public-works item. On private commercial jobs, project owners and their lenders frequently require them, and general contractors often require payment bonds from their subcontractors as a condition of the subcontract. That is a contractual requirement rather than a legal one, but it works the same way in practice: no bond, no contract.
The contractor who is required to furnish the bond - the principal - pays the premium. Because payment and performance bonds are usually issued together, contractors typically pay a single premium for the pair rather than two separate charges.
The amount of the bond (the penal sum) generally equals 100% of the contract price. The premium you pay is a small percentage of that contract amount, and the rate depends on the size of the job and the contractor's financial strength - credit, working capital, experience, and bonding history all factor in. Stronger financials earn lower rates. We do not quote a guaranteed rate on a web page because the number is specific to your business and the job; for how surety pricing actually works, see our breakdown of what contractor bonds cost and performance bond cost.
This is the part that matters most to subs and suppliers, because a valid claim gets lost when a deadline is missed. The rules below are the federal Miller Act rules. State Little Miller Act claims follow similar logic but have their own deadlines, so check the rules for your project.
There is a limit on how far down the chain the protection reaches. Parties who are too remote from the prime - for example, a supplier to a supplier - generally are not covered under the federal Miller Act. Where exactly your claim falls depends on your specific contracts, so if you are unsure whether you qualify, talk to a construction attorney before your deadlines run.
The single most common way a good payment-bond claim dies is a missed deadline. If you are not being paid on a bonded job, start the clock in your head the day you last worked, and get the notice out early.
Because payment and performance bonds are issued together, qualifying for a payment bond is the same underwriting exercise as qualifying for the bond program overall. Sureties look at the "three C's":
Here is the part a lot of contractors do not hear from other agents: getting declined once does not mean you are done. Different sureties have different appetites, and there is almost always a path to yes for a contractor who is willing to build the file the right way. That is the work we do - we help contractors qualify, not just quote. For the deep version, read how to qualify for a performance bond (the same file qualifies you for both).
A payment bond covers the subcontractors, laborers, and material suppliers on a project. If the prime contractor does not pay them for their work or materials, they can file a claim against the payment bond and recover what they are owed, up to the amount of the bond.
The subcontractors, laborers, and suppliers who provide work or materials on the project - the people downstream of the contractor. It does not protect the contractor who buys it or the project owner's investment in the building.
The prime contractor (the principal) pays the premium. Payment and performance bonds are usually issued together as a package, so the contractor typically pays one combined premium.
A payment bond protects the subs and suppliers by guaranteeing they get paid. A performance bond protects the project owner by guaranteeing the job gets finished according to the contract. They are almost always issued together but cover different parties against different risks.
On federal Miller Act projects, a claimant without a direct contract with the prime must give the prime written notice within 90 days of last furnishing labor or materials, and any lawsuit on the bond must be filed no later than one year after the last day labor or materials were furnished. State Little Miller Act deadlines differ, so check the rules for your project.
Not by law, but often by contract. Private project owners, lenders, and general contractors frequently require payment bonds. When they do, it is a condition of the contract rather than a legal mandate, but it is required all the same.
The premium is a percentage of the contract amount and depends on the size of the job and the contractor's financials - credit, working capital, and bonding history. Stronger financials earn lower rates. Because payment and performance bonds are issued together, the cost usually covers the pair.
Often, yes. Credit is one underwriting factor, not the only one, and different sureties weigh it differently. There is usually a path to a bond for a contractor willing to build the underwriting file the right way. That is exactly the kind of case we work.
Payment and performance bonds are the core of what we do. We are a national surety specialist, and our job is to find the path to yes - to help contractors qualify for the bonds they need to win the work, not just hand them a quote. Whether this is your first bonded public job or your fiftieth, we will build the program around your business.
Call us directly: (801) 505-5500, or take the Bond Scorecard to see where you stand in about two minutes.
This guide reflects how Grit Insurance Group places contractor surety bonds nationwide. Grit was founded by Kirk Chester, CIC, who has spent 30-plus years in insurance and surety, helping contractors qualify for and grow their bond programs. Bond requirements and claim rules referenced here are based on the federal Miller Act and Federal Acquisition Regulation; state requirements vary, and specific bond, coverage, and legal questions should be confirmed with a licensed Grit team member.
Related reading: Performance Bonds for Contractors | Bid Bond vs Performance Bond | Performance Bond Cost | The Miller Act | Bid Bonds | How Much Do Contractor Bonds Cost