Network Rail is insisting contractors on its projects drop the use of retentions and commit to paying subcontractors within 28 days.
The move comes as part of "significant changes" to contracts ahead of its next five-year funding period (Control Period 6) from 2019-2024.
Network Rail introduced a best practice Fair Payment Charter applying the principles to its own payments to suppliers in 2011.
It said formalising the regime for CP6 was the "next natural step" and was supported by major contractors.
Stephen Blakey, commercial director, Network Rail said: "The Fair Payment Charter was about recognising that cash flow is the ‘life blood’ for every supplier by committing to pay for goods and services in a fair, predictable and timely way.
"Harnessing the support we have already received from our major suppliers, we have simply taken the next natural step and formalised that approach for CP6. Culturally, it sends a huge signal as to the value we place on a sustainable supply chain and the way we want to do business.
"We recognise the challenges faced by smaller suppliers and are in a position to influence the way work on our railway is delivered and paid for. It is in our interest to have a sustainable supply chain at all levels – they are vital to the successful delivery of our projects and the safe operation of Britain’s railway."
