I reported right here on this blog about how contractors spend an average of 20 days a year chasing clients for late payments. Sometimes they never get paid.
This led the government to step in and announce they would setup a special branch that is focused 100% on making sure contractors, the self employed, and small business owners get paid on time.
To be honest I doubted if they would actually go through and take action, but it looks like they have.
From last week, all large companies and limited liability partnerships will now have to share details of their payment practices with the government, and if they don’t, then they can expect to get punished and even be put out of business.
Not only that, but contractors who are finding it difficult to get paid by clients can go directly to the government to get things sorted.
Why are the government stepping in now? Well, I think they have just realised how much of a problem late payment is…with one report suggesting that self employed workers in the UK are owed £26 Billion pounds in overdue payments as we speak.
That is definitely not small change, and if big companies keep getting away with not paying contractors the money they are owed then it could start to become a real problem for the economy.
If the government don’t take action then it might lead to an economic meltdown, not something we want as Britain leaves the European Union.
The main information that large companies are now required to share is their average payment time for invoices. If they are taking too long then a government official will be demanding to know why.
Right now, it is only companies who have a turnover over 36 million a year or a balance sheet of over 18 million that will have to report on details of their payment practises, but as time goes on I think that smaller companies might have to do the same as well.
This ensures that contractors get paid on time by all of their clients, and they can even check to see the payment record of a particular company before agreeing to work with them.
Will this completely stop late payments for contractors though? Unfortunately not, as there is always a few companies that try to game the system and get around the rules.
Also, it remains to be seen if the government actually enforce the rules and punish companies that don’t pay contractors on time. They might take action for a few months to grab some headlines, but then start to ignore it after a while.
Hopefully this won’t happen, and contractors can finally get paid the money they are owed. At the end of the day, £26 Billion pounds owed is just way too much, and something needs to be done about it.