Late Payments: Fighting the Industry’s Corner

It’s not a new issue, but one that REC members continue to struggle with: getting clients to pay on time. This comes up regularly in REC forums and sector meetings, with many members, particularly SMEs, reporting that chasing payments is a major drain on resources that could otherwise be spent sourcing candidates and filling roles.

Late payments also make it difficult for agencies to manage their cash flow. After all, even if clients don’t pay on time, workers still need their wages, so agencies too often have to act as creditors and cover the shortfall. That can mean some tricky financial gymnastics, having less resource to invest in staff and business development, and a great deal of unwelcome stress.

While this problem can be particularly acute for recruiters, especially those in the temporary side of the market, the government has recognised that businesses in many sectors are disadvantaged by not being paid on time. The Department for Business, Innovation and Skills (BIS) has launched a consultation on ‘Building a Responsible Payment Culture’, asking businesses of all sizes for evidence on late payments and what can be done about them.

The REC will highlight the particular ways late payments affect recruiters and their critical role in the jobs market. But to do this most effectively, we need to hear from you on key issues, such as:
- How often you deal with late payments or have to chase clients on invoices due?
- The prevalence of ‘pay when paid’ clauses and how they affect your business
- Which companies tend to pay late: Public sector? Private sector? Larger or smaller clients?
- Whether you know about the Prompt Payment Code and if it works
- Whether you would consider charging interest on late payments
- The overall impact of late payments on your business

We’ve also been working with other associations, like the CBI, on possible solutions and would appreciate your thoughts on these too. For example:
- Shifting the emphasis of the Prompt Payment Code from voluntary to mandatory
- Changing government procurement rules to ensure suppliers pay promptly or risk getting ‘blacklisted’
- Government setting up a new ‘prompt payment’ enforcement agency, as exists in Sweden.
- Tightening legislation for shorter payment terms
- Making it mandatory for Plcs to state their payment record in annual reports, and using the information to charge a levy where this averages over 60 days
- Sharing best practice of large corporates and SMEs working together to reduce payment delays

Please share your views by email here. Any sensitive business information will of course be kept confidential and/or anonymised.