A win for IPSE's campaign on late payment – and what it means for you
- 2 Oct 2020
IPSE has welcomed the news announced this week (1 October) that the government has responded to IPSE’s campaign to clamp down on late payment. The government has said it will be consulting on plans to give the Small Business Commissioner (SBC) more powers to resolve late payment issues, including the ability to launch investigations and impose fines and address ‘small business to small business’ complaints.
IPSE has long campaigned for an end to the culture of late payment that blights the incomes of so many self-employed workers. Our research has previously shown that nearly two-thirds of self-employed people have experienced delays in payment and they spend an average of 20 days a year chasing unpaid invoices. Worse still, half of the self-employed have completed work they were never paid for and, in the creative industry, freelancers lose an average of £5,400 a year through unpaid work.
The consultation comes after the government also put a survey out seeking views on strengthening the Prompt Payment Code, the UK’s voluntary code that sets standards for large organisations’ payment practices.
What is in the government proposals?
The latest government proposals would, if enacted, be a significant win for IPSE and our campaign calling for tougher action on late payment. Back in February, we published our latest report on the issue, ‘Pay Up: how to end late payment for the self-employed’, and we are delighted to see our key recommendations now being considered by government.
While the consultation covers many areas, here are some of the key measures the government is seeking views on that self-employed individuals could benefit from.
- First, the government is looking to give the Small Business Commissioner (SBC) the new power to issue fines or court orders to companies if they fail to pay their smaller suppliers on time.
The SBC would be able to order companies to pay their suppliers, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld – with those that do not do so facing further penalties, including fines. IPSE have been calling for this power for several years, and we believe it would give a strong incentive for companies to pay their supply chain on time.
- Second, the SBC could be strengthened further under the plans by giving the role greater investigatory powers to crack down on bad practice. Specifically, the consultation will look at whether the Commissioner can launch investigations into suspected bad payment practice – without having received a complaint from a small business – and compel companies to share information on their payment practices.
- Third - and particularly important for freelancers – the government is looking at expanding the scope for complaints to the SBC, to allow the Commissioner to investigate complaints about other businesses relating to payment matters.
That means, in other words, the Commissioner will be able to look into complaints from small businesses and the self-employed about other small businesses. We know this is a crucial issue for freelancers, who often carry out work for SMEs rather than large multinational corporations but can face the same challenges in recovering payment they are owed. In our Pay Up report we called for the Commissioner to be given powers to “hold smaller businesses (as well as large) to account for their payment practices” – the proposals in the consultation would do just that.
- Lastly, the consultation would give the Commissioner power – on the instruction of the BEIS Secretary of State – to carry out a review on the effect of relevant legislation, policies and practices on small businesses.
Interestingly, BEIS say this need not be limited to payment matters. While we will be seeking more detail, this could in effect create a way for government to ‘freelance-proof’ the impact of government policies and legislation, something that would be hugely welcome.
IPSE will be looking into the proposals in more detail over the coming months but, on first glance, this is a substantive and positive set of ideas. If taken forward, this could be a genuine turning point in the battle against late payment.
Have your say
If you want to have your say on the consultation, or a story to share about your experiences with late payment, then you can get in touch with us at [email protected]. If you want to respond directly to the consultations, you can respond using the links below:
- Consultation: Increasing the Scope and Powers of the Small Business Commissioner (Deadline 24 Dec)
- Survey on the potential reforms of Prompt Payment Code (Deadline 16 Oct 2020)
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