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More action needed to tackle late payment, say recruiters

Tue, 3 Jun 2014
Construction workers and cranes
Recruiters say that more needs to be done to tackle the problem of late payment by clients.

Following the end of the consultation period to the ‘Building a responsible payment culture’ consultation launched last year, business secretary Vince Cable said on Friday that the government will make it compulsory for large companies to publish information about their payment practices.

“For too long, too many large companies have been getting away with not paying their suppliers on time to maximise their profits. It is small business that is suffering as a result and it needs to stop,” said Cable.

The government believes that naming and shaming companies will force them to change their behaviour, and it says it will work with business to develop a “robust” payment reporting framework. However, it has stopped short of making it compulsory for companies to pay their suppliers within a certain number of days.

Late payment has long been recognised as a particular problem in the construction sector. And according, to Mike Wynn, managing director of Construction and Property Recruitment, the government’s proposals do not go far enough. Wynn tells Recruiter  he would like the government to make it compulsory to pay suppliers within between 35 and 45 days.

Wynn explains that it cost his company £1.1k to service the debt with his invoice finance discount company as a result of one client taking 75 days to pay. This was for the supply of just two temps, he says.  Wynn adds that having just been paid “I am now £140 a week better off”.

Wynn says that companies that take longer than 35-40 days to pay should be forced to pay the interest charges for servicing the debt, currently incurred by staffing companies such as his. 

Adrian Marlowe, chair of the Association of Recruitment Consultancies, agrees and tells Recruiter: “We don’t think this goes far enough. There is no good reason for delaying prompt payment when labour has been supplied and work properly done.”

Samantha Hurley, head of external relations at the Association of Professional Staffing Companies (APSCo), tells Recruiter that the trade body “welcomes the government’s focus on the payment issues faced by businesses”.

Hurley explains that the inclusion of ‘pay when paid’ clauses makes it very difficult for recruitment firms to access finance at an affordable rate, and that APSCo is working with the Institute of Credit Management to produce a payment code of practice for the sector. “We’re really pleased that the government’s consultation response states that it will ‘tackle contractual barriers such as bans on assignment’,” says Hurley.

Kate Shoesmith, head of policy at the Recruitment & Employment Confederation, says: “Legislation around late payments has been long overdue and government action is a welcome development as late payment is often raised by REC members as a major issue for agencies of all sizes.

Shoesmith adds that one area that needs attention is the growth in ‘pay when paid’ clauses, “which we think should remain under review as the government seeks to strengthen reporting practices and enhance transparency in the system”.  

It is not clear when this latest legislation will be introduced, with the government only committing to give legal force to a new reporting framework ‘when Parliamentary time permits’.
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