In a contract, “work performed” means the actual labor, services, or materials you have provided toward the scope of the agreement, as distinct from work that is finished or delivered in final form. The phrase matters because the date you last performed work is the trigger that starts payment deadlines, the clock on mechanic’s lien filings, and your obligation to report the income. Get the definition and the date right, and the contract works in your favor. Get them wrong, and you can lose the right to collect even for work you clearly did.
What Counts as Work Performed
Work performed covers any physical or intellectual effort directed at the objectives of the contract. In construction, that includes hands-on tasks like excavation, framing, and electrical installation. In professional services, it covers engineering analysis, architectural design, and legal consulting. Administrative effort such as project management and scheduling also counts when the contract lists those activities as billable.
Many agreements reach further than direct on-site labor. Mobilizing heavy equipment to a job site, procuring custom-fabricated materials, and off-site fabrication of components built for a specific project can all qualify. That reach matters for lien rights in particular: most states recognize the value of materials fabricated off-site as part of the work performed, provided those materials are earmarked for the particular project. Fees are usually calculated on hourly rates, unit prices, or a fixed percentage of total contract value.
The key distinction to hold onto is between work performed and work completed. Work performed captures ongoing effort during a billing cycle. Work completed implies a finished deliverable. That difference is what lets contractors and consultants bill for progress rather than waiting until the end of a project to see any money.
Substantial Performance When the Job Isn’t Perfect
Courts often evaluate disputes over unfinished projects through the doctrine of substantial performance. If you’ve met the primary obligations of the contract with only minor deviations or punch-list items left, you’re entitled to the contract price minus the cost of correcting those deficiencies. A painter who finishes 98% of a building but misses some trim work has substantially performed. A painter who used the wrong color on every wall has not. The doctrine stops clients from using trivial shortcomings as grounds to withhold the entire payment.
Change Orders and Out-of-Scope Work
Performing work outside the original scope without written authorization is one of the fastest ways to lose money. Most construction contracts require change orders to be in writing and signed before the extra work is billable. The AIA A201 contract, for instance, requires written agreement from the owner, contractor, and architect on the changed scope, adjusted price, and revised timeline.
The written requirement isn’t always ironclad. If an owner repeatedly directs extra work verbally and pays for it without objection, courts have found that pattern of conduct can waive the written change order requirement. Still, relying on verbal authorization is a gamble. If a dispute arises, the contractor without a signed change order is the one holding the bag. The safer practice is to refuse extra work until the paperwork is signed, even when the client calls it urgent.
How the Date of Work Performed Triggers Payment
Once you perform work and submit a proper invoice reflecting it, the client’s payment clock starts. Under federal government contracts, the standard prompt payment clause requires payment within 30 days of the billing office receiving a proper invoice.1eCFR. 48 CFR 52.232-25 – Prompt Payment Private contracts set their own timelines, but 30 days is the most common benchmark.
When the government misses that deadline, interest penalties apply automatically, without the contractor having to request them. The interest rate is set by the Secretary of the Treasury and published in the Federal Register rather than fixed by statute.2Office of the Law Revision Counsel. 31 USC 3902 – Interest Penalties Unpaid interest after 30 days is added to the principal, so it compounds. The government cannot use “temporary unavailability of funds” as an excuse to skip the penalty.
Private-sector prompt payment statutes vary by jurisdiction but generally follow the same structure, imposing mandatory interest once a proper invoice goes unpaid past the statutory or contractual window. The practical lesson is the same regardless of context: document when work was performed, invoice promptly, and the law gives you real leverage.
Retainage: Why Full Payment Is Held Back
Even when the work is performed and the invoice is clean, you often won’t receive the full amount. Retainage is the portion of each progress payment the owner withholds until the work is substantially or fully complete. It functions as a security deposit deducted from every pay application.
On federal construction contracts, retainage cannot exceed 10% of the approved payment amount. State caps typically fall between 5% and 10%, and some states reduce the allowable percentage once a project passes the halfway mark. Retainage should not be used as a substitute for good contract management, and contracting officers are expected to adjust the withholding as the project nears completion based on contractor performance.3Acquisition.GOV. Progress Payments Under Construction Contracts If you’re a subcontractor, read the retainage terms carefully, because money held back from your invoices is often the last to be released.
Documenting the Work
A claim for payment is only as strong as the paperwork behind it. Proving that labor took place requires a trail connecting the work to specific dates, personnel, and contract line items. Daily activity logs record who was on-site and what they did. Signed timesheets verify the hours. Dated photographs supply visual proof of physical progress. In litigation, those records are often the difference between collecting and losing.
In construction, the AIA G702 Application and Certificate for Payment is the standard billing form. It requires the contractor to list the total contract sum, the value of work completed to date, retainage withheld, previous payments received, change orders, and the current amount requested.4AIA Contract Documents. Summary: G702-1992, Application and Certificate for Payment
Federal labor regulations require employers to preserve payroll records, including timesheets and wage computation data, for at least three years from the last date of entry.5eCFR. 29 CFR 516.5 – Records to Be Preserved 3 Years That three-year minimum covers most wage disputes, but it is a floor, not a ceiling. Statutes of limitations for breach of contract or lien-related claims can run longer in some jurisdictions, so holding records for five to seven years is safer. Digital backups of logs, photos, and pay applications cost almost nothing and can save a case years after the project wraps.
Lien Rights and the Last Date of Work
For contractors, subcontractors, and material suppliers, a mechanic’s lien is the strongest tool for collecting on unpaid work. The lien attaches to the property where the work was performed, creating a secured interest that survives a sale. But lien rights are governed by strict deadlines that run from the last date you performed work or delivered materials.
Those deadlines vary widely by state, ranging from 60 days to more than a year depending on your role on the project and the type of property. Missing the window by a single day typically destroys the lien, with no second chances. The clock starts silently; nobody sends a reminder.
Most states also require a preliminary notice to the property owner, the general contractor, or both before you can later file a valid lien. Those preliminary notice deadlines also run from the date work is first performed or materials first delivered. In some states, you must send notice before furnishing any labor at all. Skipping that step can void the claim even if the lien itself is filed on time. If you have any doubt about payment, send the preliminary notice early.
When Work Performed Becomes Taxable Income
Tax treatment of work performed depends on your accounting method. Most individuals and small businesses use the cash method and report income only when payment is actually received. Work completed in December but paid in February belongs on the following year’s return.
Accrual-method taxpayers follow the all-events test. You must include an amount in gross income for the tax year in which your right to receive the payment is established and the amount can be determined with reasonable accuracy.6Internal Revenue Service. Publication 538 – Accounting Periods and Methods Work performed and billed in December is taxable in December’s tax year, even if the check arrives months later.
Writing Off Unpaid Work
If you perform work and never get paid, whether you can deduct the loss depends on your accounting method. Cash-method taxpayers generally cannot take a bad debt deduction for unpaid fees, wages, or services because the income was never reported to begin with.7Internal Revenue Service. Topic No. 453, Bad Debt Deduction Accrual-method taxpayers who already recognized the income can deduct a business bad debt once it becomes worthless, but only in the year it becomes worthless, and only after reasonable collection efforts. If you give up on a 2024 invoice in 2026, the deduction belongs on the 2026 return.
A Note on Employee Hours Under the FLSA
If the question is really about employee work time rather than contract performance, a different definition applies. Under the Fair Labor Standards Act, compensable time includes all “principal activities” an employee is hired to perform plus tasks that are an integral part of those activities, such as donning required protective gear before operating machinery.8eCFR. 29 CFR 790.8 – Principal Activities That framework governs wage-and-hour claims for employees and is separate from what “work performed” means between parties to a service or construction contract.
Consequences of Misreporting Work Performed
Inflating invoices or fabricating records has consequences well beyond losing the contract. In private disputes, a client who discovers that a contractor overstated work performed can sue for fraudulent misrepresentation, which opens the door to compensatory damages covering the overpayment and downstream losses.
On government contracts, the stakes jump sharply. Under the federal False Claims Act, anyone who knowingly submits a false claim for payment is liable for three times the government’s actual damages plus a civil penalty for each individual false claim. Those per-claim penalties are adjusted for inflation and currently range from $14,308 to $28,619 per violation.9eCFR. Part 85 – Civil Monetary Penalties Inflation Adjustment The statute also covers knowingly using a false record to support a claim, so exposure extends to anyone who signs off on fabricated timesheets or inflated progress reports.10Office of the Law Revision Counsel. 31 USC 3729 – False Claims On a project with dozens of pay applications, the arithmetic adds up quickly, and intentional fraud can also trigger criminal prosecution and debarment from future government work.