New powers will enable them to report clients to government should they suspect them of inaccurate payment practices, an employment lawyer has claimed.

Under new rules, effective from April, UK companies with more than 250 employees and £36m+ annual turnover, and limited liability partnerships (LLPs), will have to publicly report twice a year on their payment practices and performance, including the average time taken to pay supplier invoices. Failure to report will be deemed a criminal offence.

According to Christopher Tutton, partner at law firm Constantine Law, under new guidance on the new rules published by government this week, recruiters will be able to report large firms to government for inaccurate reporting.

Tutton told Recruiter: “Under the regulations, large companies must prepare and publish information about their payment practices and performance in relation to ‘qualifying contracts’. The report must be published on a web-based service provided by or on behalf of government within 30 days of the end of the reporting period. Under the guidance, contracts with recruiters will amount to ‘qualifying contracts’, which need to be reported on by large businesses, providing they relate to services provided in (or which have a connection with) the UK.

“The guidance confirms that anyone who is concerned that a business might not have complied with the reporting duty, or who may have made a false statement, can raise this by contacting the company directly or by contacting the Department for Business, Energy and Industrial Strategy (BEIS). BEIS will then contact the business in question.

“Businesses can be prosecuted if they do not comply or they provide false information.

“If recruiters are not being paid by their larger clients but this is not reflected in the payment performance report filed by the company, recruiters will be able to raise these concerns with the business and with BEIS. This may give them additional leverage in obtaining prompt payment from larger clients.”

Commenting on government’s move, Lisa Graham, director at multi-sector recruiter E1EW, told Recruiter late payments can be a big problem, as the agency pays its contractors weekly but bills clients monthly.

“If there is a late payment we’re carrying what we’ve paid out in wages, and cashflow is always an issue. It’s the big guy knocking the little guy – we need their business and they’ve got us over a barrel.

“It’s good to have a big contract and volumes because it helps us as a recruitment business but late payment squeezes us on cash. We’re having to put extra money in because we’re not being paid by these bigger companies and they are not doing what they say they are going to do.”

Meanwhile, David Taylor, founding director at telco staffing specialist First Point Group, told Recruiter the government’s plan will help the agency decide which clients they do business with.

“It’s a welcome thing. If you’re thinking of adding a new client, you can what their average payment speeds are and if they actually stick to their agreements – so in terms of vetting that would be good.”