Transfield Services says contractors rolling out ultra fast broadband cable will be paid hundreds of thousands of dollars they are owed in full.
The Australian company is responsible for 40% of the Government's ultra-fast broadband rollout.
The company announced on Friday it had already paid a third of outstanding debts to subcontractors and the remaining two thirds would be paid in full in the next two business days.
In a statement, the company apologised for the disruption in payments, saying it is concerned and disappointed the situation has escalated. It said after a detailed examination it had found a solution that should allow it to pay all subcontractors.
Transfield says it will now keep subcontractors, clients and the Government informed as to how the problem is being resolved.
On Thursday Transfield suspended work for up to three months for at least three of subcontractors working on the rollout. Other subcontractors stopped work because they had not been paid since July.
On Wednesday, a Transfield spokesperson said payment problems could have been caused by a new payroll system.
Good news - EPMU
Engineering, Printing & Manufacturing Union organiser Joe Gallagher said Friday's announcement is good news as subcontractors told him they were worried about going bust.
"I spoke to someone last night who was owed nearly a million dollars and he had quite a few employees and potentially he was about to lay them off. And there was another guy who had to remortgage his house to pay his workers yesterday.
"A few other guys are on the brink of going into receivership, because to get into this industry sphere there's a lot of specialised gear and they have to borrow money.
"These guys are what I would term dependent contractors. They are reliant on one company, they can't just jump from company to company."
Mr Gallagher says the new promise of payment means subcontractors are too scared to speak out against the company, for fear of losing further work.
Transfield did not answer questions from Radio New Zealand News about what the problem is, saying they were busy sorting it out. It has been variously reported as a design fault and a software malfunction.
'Disappointing', 'unacceptable' say WEL, Chorus
A spokesperson for one of the three companies that hired Transfield - Enable - says he hopes it is a unique situation and they are currently investigating the cause of the non-payment
WEL Networks says it has the biggest contract with Transfield. Its chief executive Julian Elder says he's been told by Transfield there were multiple issues. He describes them as "system related", including the forecasting of cash flows.
Mr Elder says he's extremely disappointed with the glitch and he's seeking assurances it won't happen again.
The third company, Chorus, says Transfield's treatment of subcontractors has been unacceptable.
Chorus says it welcomes the assurance that subcontractors will be paid in the next two business days but wants assurances there will be no repeat of the non-payment.
Chorus chief executive Mark Ratcliffe says the treatment of the subcontractor community has been unacceptable.
He says they have invested in equipment, people and training and have taken risks, and don't deserve to be treated this way.
Earlier comment
Crown Fibre Holdings, which is managing the contracts on behalf of the Government, said earlier Transfield had promised to resolve the issue soon.
Telecommunications Users Association chief executive Paul Brislen believes cost overruns could be the problem.
"That seems to be at the heart of the matter right across the UFB deployment," he told Radio New Zealand.
"What it boils down to, as far as I can tell, is under-bidding for a contract you know you can't fulfil but because it's a Government initiative you can go back cap in hand and ask to be propped up."
Political fallout
New Zealand First leader Winston Peters says Transfield is acting now only because it was exposed.
He says if the Government does not get a good explanation, it must make an example of the company as soon as possible.
Mr Peters asked about non-payments by the company during Question Time in Parliament on Wednesday.
