Despite Government Measures, Late Payments Continue to Be Huge Issue for REC Members

The Government has put in place measures to help SMEs address late payments, however, these need to be more widely publicised.

24% of UK businesses report that late payments are a threat to their survival, the highest reported level among all European countries. Even if it is not a threat to the survival of a business, late payments have a significant impact for companies, creating administrative costs and cash flow issues as well as leading to loss of income, inability to hire and pay bills.

This is an important issue for the recruitment industry, particularly Small and Medium-Sized Enterprises (SMEs). Additionally, for our members that place temps, they are required by law to pay workers even when they have not yet been paid by their client. They must cover the weekly payroll for temps out on assignment, making cash flow very important.

In recent years, the Government has introduced measures to address the issue, including:

• The requirement on large businesses to report on payment practices and policies, which can be accessed through an online portal.

• The introduction of a Prompt Payment Code, with over 2,000 organisations signing up to pay 95% of invoices within 60 days and work towards 30 days as normal practice.
• Legislation that gives suppliers the right to charge interest on late payment and reclaim administrative costs for chasing late payment.
• The creation of a Small Business Commissioner, which provides advice and information to small businesses on resolving payment disputes.

Additionally from April 2019, companies unable to demonstrate prompt payment to suppliers could be prevented from winning government contracts.

However, our research shows that members have actually seen the situation worsening over the past three years. There was also an indication that REC members are unaware of the resources to help them navigate this difficult and business critical issue.

This would suggest that the Government has not successfully promoted the new measures to smaller businesses. A Government campaign providing clear advice would be a welcome step. We raised this in a recent Government consultation.

Current Government advice on how to deal with late payments can be found online here. We will continue to demonstrate to the Government the impact of this issue on our members. If you would like to raise any concerns or thoughts, please contact chris.russell@rec.uk.