The self-employed make up over 15 per cent of the UK workforce – and face challenges that larger organisations don’t have to deal with – yet so many of their clients still think it’s ok to pay their invoices late.
A recent report in the Financial Times calls on UK law to back freelancers’ right to be paid on time.
According to the Federation of Small Businesses (FSB), 50,000 small firms go under each year because of late-paying clients.
The FSB estimates that the cost to the UK economy is as much as £2.5 billion.
The problem has far-reaching consequences across a wide-range of industries, from creative professionals working in fashion and copywriting, to tech experts, to lawyers and consultants.
Not being paid on time – or sometimes at all – is seen by some as one of the risks you simply have to take as a self-employed person or small business owner.
But surely there must be some protection for freelancers?
Unfortunately, going to court is rarely seen as an option for small businesses, which are less likely than larger firms to be able to afford the associated legal fees. It’s a complicated process, too.
The Late Payment Act 1998 came into force before the rise in popularity of using freelancers on relatively short-term contracts. So it might be argued that it's no longer fit for purpose, because for small business owners struggling to get paid, the only way they can enforce payment is through the courts.
Some sneaky clients even use late payment of invoices as a way to keep cash in their own bank accounts, at the expense of their suppliers’ cash flow.
But freelance bodies are saying, enough is enough, and are calling for solid contracts and clear procedures for the self-employed to discourage this unfair practice.
They’d like to see a complaints registration process put in place with local government bodies, which would give small businesses legal help and allow them to sue late-paying clients for double the unpaid invoice amount.
Here in the UK, we could learn a thing or two from the legislation that was brought into force in New York City in 2017.
Their Freelance Isn’t Free Law gives the authorities the power to enforce penalties against clients who don’t pay in full within a reasonable timeframe.
While we wait for a change in UK law, there are a few ways freelancers and small businesses can help themselves:
Trade unions like the GMB have started to represent freelancers in negotiations with companies, but, according to the Financial Times:
“If [freelancers] want to effect change, they should remember there is power in numbers and especially when it comes to making their voices heard by legislators. For while union support is welcome, there is little substitute for policy action to secure the fair treatment their growing role in the economy deserves.”
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2020 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.