Such is the regularity of late payment for freelancers and contractors, it has now become synonymous with this way of working.
It cripples the cashflow of thousands of UK freelancers and small businesses, and was the very reason that 50,000 of those companies went under last year, according to the FSB. Now, after numerous calls from the sector to address the UK’s late payment epidemic, which saw just 51% of freelancers and contractors paid on time in 2015, the Government has finally responded.
A Small Business Commissioner is to be appointed, whose primary role will be to tackle the culture of late payments and 'become a national spokesperson for small businesses affected by payment issues.'
In theory, this should be seen as a positive step towards ending late payment once and for all. But it looks like it’s going to take a more substantial move from Government to convince freelancers and contractors.
Just 2% of freelancers and micro-businesses surveyed by FreeAgent believe a Small Business Commissioner will be able to do anything about tackling late payments. On top of this, the majority of the 700 UK freelancers, contractors and independent workers asked weren’t even aware the appointment was to be made.
£26.3bn is currently owed to UK small businesses in the private sector, costing the economy £2.5bn every year. Given that freelancers and contractors together contributed £119bn to the UK economy in 2016, needless to say it’s in the Government’s best interests to keep the independent workforce operating at full tilt – and not wasting a reported 20 days of their working year sorting and chasing unpaid invoices. To put that into perspective, time spent chasing payments works out at a staggering £16.5billion in lost income.
“While it’s good news that the government has decided to address this issue with its search for a small business commissioner, it’s clear that the micro-business community remains skeptical about the move. Hardly any micro-business owners believe that this commissioner will actually be successful in tackling late payment - and most of them don’t even know that the role has been created in the first place,” FreeAgent CEO Ed Molyneux explained.
For some time now, IPSE, The Association of Independent Professionals and the Self-Employed, has been knocking at the door of Number 10, not just to put a stop to the issue, but to readdress the balance of power in late payment disputes, as IPSE’s Director of Policy, Simon McVicker stated:
“Small businesses and the self-employed still have little power to resolve disagreements with larger clients or customers when paid late, which means the average debt they are owed continues to be at a staggering level. The balance of power in such disputes will always favour the larger party, at least until we see the UK’s Small Business Commissioner in action next year.”
As the search continues for a Small Business Commissioner however, questions will remain over the power, and efficiency they will ultimately hold over ending the scourge of late payment that continues to hamper the majority of the UK’s independent workforce.
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