In the UK today, self-employed workers are owed £26 billion. Recent research shows the average self-employed worker on average are chasing £7,000 in late payments. We want to get that money back in our members’ pockets and back into local economies.
In an April 2023 survey of 100 Community self-employed members, 84% told us that late payments had an impact on their finances. Just 16% of our self-employed members were unaffected by late payments.
We have been effective in supporting our self-employed members to challenge clients who have failed to pay and work with our members to ensure clients pay up and pay on time. We hear disgraceful stories of our members having to chase late payments, and as a consequence being pushed into overdrafts, ticking over into the next financial year and therefore affecting taxable income, and others simply not being able to pay their home bills on time.
That’s why we have recently responded to the Small Business Commissioner’s Statutory Review to share our members’ views and experiences.
Too many of our members have to turn to us to help them with their late payments because many do not consider the Small Business Commissioner as a viable or effective route for resolving payment concerns.
That’s why we have responded to say the effectiveness of the SBC is hampered by its lack of proactive powers, inability to impose penalties, as well as lack of awareness of its functions. The SBC should call for legislative change to increase penalties for late payments and it should be empowered to take action and impose binding agreements on those who fail to pay on time, particularly repeat offenders. The key role of the SBC should be to identify such patterns and understand which businesses are repeatedly failing to pay suppliers on time.
Longer term, we want to see a ‘freelancing without fear’ model to tackle the challenge of late payments. Late payments could be prevented early on in the client-supplier relationship by ensuring that both sides have a written contract in place, which clearly spells out deliverables, a timetable for payment and the best point of contact in the client organisation.
A good example of this is the Freelance Isn’t Free Act in NYC made such contracts mandatory for any engagement which amounts to more than $800 over a four-month period. This move could be replicated in the UK and would address the problem of suppliers becoming unstuck in talks when no contract is surfaced.
We’ll be calling for the next government to introduce a new law to tackle late payments, explore increasing the interest rate that can be charged on late payments and create a right to a written contract for any supplier engaging in a transaction above a given size.
Experiencing issues with late payments?
Community is here to help, and our team of legally trained policy advisors have supported a number of self-employed Community members to secure payments from difficult clients. Get in touch with us if you are concerned about this and we’ll do everything in our power to help.