Commentary: The curse of late payments plaguing freelancers
Contractors are required to do much more than the job in hand before they are paid for it, says Iona Bain.
LONDON: All I wanted for Christmas was … my latest invoices to be paid. On time. Without any hassle, hoop-jumping or hare-brained demands.
No, it’s not the weird version of Mariah Carey’s classic hit you haven’t heard. It was the festive wish of freelancers everywhere.
December and January are financially tricky months for most, with increased spending followed by the dreaded tax return in the UK. Even employees who were paid early for Christmas might have to wait six weeks until their next payday.
But at least they know the money’s definitely on its way. Nothing strikes fear into a freelancer’s heart quite like an out-of-office message from a client that owes us money.
PAYMENTS ON TIME
A recent tweet from the comedian Katy Brand said: “An annual reminder to all companies to pay your freelancers before Christmas. If you go on your salaried holiday before you have done all your admin, you may well ruin someone else’s Christmas. Clear your desk first. Then get as drunk as you like.”
I’m not on anybody’s naughty list. I’ve delivered all my work on time, to the satisfaction of my clients.
Yet the most important question (which I ask of anyone who commissions work from me) is this: “What do I need to do to ensure you pay me promptly?”
“Just send us your standard invoice, that’s all the finance department needs,” is often the breezy reply. Oh, if only!
By UK law, firms must pay their suppliers within 30 days unless a contract says otherwise. Yet it’s when that long month passes, and payments fail to materialise that the cash flow nightmare of Christmas begins for so many freelancers.
A common problem is the failure of clients to tell us what we must provide to ensure we are paid (such as a purchase order number, or setting out an invoice in a particular way). Often, that information is only disclosed after the invoice is overdue and we’re already in chasing mode.
THE HASSLE TO GET PAID
Then there is the absurd admin. I have seen and heard it all. One agency I worked for this year said they needed a character reference from another satisfied client before they could process my payment — even though I had already done the work.
In the end, FT Money editor Claer Barrett kindly obliged, though not before (politely) ticking them off for wasting her time.
A higher education institution requested I send my bank account details on headed notepaper (yes, really) and then insisted much later that I completed its diversity and equality form.
I literally had to tick boxes, assuring that it was not my practice to discriminate against others on all grounds imaginable. Just as well; the event I chaired where I could have exhibited outrageous prejudice was by then a distant memory. That payment was for £100 (US$130).
BOGGED BY PAPERWORK IN A DIGITAL AGE
You might think that in this era of digital payments, the various platforms set up to match freelancers and clients would grease those payment wheels. So far, this hasn’t been my experience.
After completing a piece of broadcast work for a financial institution, its agency eventually activated my payment on a platform called YunoJuno.
Some freelancers use it to apply for jobs and like it a lot. But for freelancers like me who are forced to use it once to get paid, it was maddening.
Almost two months later, I was scanning copies of my birth certificate and ancient payslips to verify my identity and working out how to fill in a time sheet for a job that lasted 15 minutes.
The rise of the “gig economy” means there are plenty of rival platforms springing up, no doubt each with their own quirks.
The advantage for big firms is that they’re secure, and outsource the hassle of dealing with supplier payments. But these payments platforms add additional layers of complication, especially if the end client doesn’t have a clue how they work.
Many appear to be geared to small businesses offering their services rather than individuals. One freelancer I know said she was asked to provide her “corporate environmental policy”, which consisted of a recycling bin in her kitchen.
Another was asked to sign up to an e-invoicing system for which he would need to pay a subscription. Paying to get paid, whatever next?
I’m largely very fortunate, as many of my clients pay me swiftly. I don’t have huge overheads like an office to rent or staff to employ, and I’ve been able to build up a savings buffer to resolve any temporary cash flow crises.
BANE OF SMALL BUSINESSES AND FREELANCERS
Even so, this issue is the bane of sole traders and small businesses today. According to the Federation of Small Business, 50,000 firms go out of business every year as a result of late payments at a cost of £2.5 billion to the economy.
It also takes a huge toll on freelancers’ mental health and morale. Research from IPSE, the association for the self-employed, shows that we spend an average of 20 days a year chasing late payments, with 43 per cent of us writing off at least one unpaid piece of work.
This may sound extreme but many freelancers don’t like to complain, fearing they will lose work in an increasingly competitive marketplace.
There was a 31 per cent surge in the number of new UK freelancers in the year to June 2019, according to the broker Simply Business.
As more big businesses opt for the nimble input of freelancers — partly because they don’t have to provide us with a pension, sick pay, parental leave or paid holidays — more freelancers are asking whether we’re getting a fair deal in return.
I understand the need to verify identities to avoid fraud. But some requests are so onerous and silly, they speak to a lack of common sense and consideration among those demanding them.
One-size-fits-all payment processes might work for a certain kind of contractor working by the hour, but they are administrative hell for freelancers doing one-off pieces work for a fixed fee.
TACKLING LATE PAYMENT
Ironically, the UK government has been promising action on late payments for ages with no sign as yet of firm delivery. Plenty of freelancers and small business owners are hoping the promises made in the Queen’s Speech to tackle late payments will bring change.
Meanwhile, maybe it’s time to get tough. As the law stands, freelancers are entitled to charge late payers compensation and penalty interest on commercial debts.
For amounts owing up to £999, the penalty is £40, rising to £70 for debts up to £9,999 and £100 above that. Interest is also payable at the base rate plus 8 per cent. So a debt that is 40 days late and worth £1,000 would clock up charges of £79.20.
Freelancers never like to rock the boat. But one of my new year resolutions will be threatening to charge if clients don’t play fair.
If you or your business has any responsibility for the livelihood of small suppliers, make it your resolution to find out if your own payments system is up to scratch.
Iona Bain is a freelance financial writer and author of the and the book “Spare Change: How to save more, budget and be happy with your finances”.