Prompt payment regulation reforms needed to ease the financial pressure on the supply chain
The Association of Professional Staffing Companies (APSCo UK) and APSCo OutSource – the trade body for the recruitment outsourcing sectors – has called for an extension of the Payment Practices and Performance regulations 2017 beyond 6th April 2024 in order to reduce the financial pressures on the contingent worker supply chain.
In its consultation submission to the Department for Business and Trade and the Department for Business, Energy & Industrial Strategy, the trade associations highlighted that that those on the lower end of the supply chain face unfair financial pressures due to their position in the process. With contractor and contingent resources often requiring payment within 7 – 28 days of timesheet submission while end clients have longer payment terms that lie between 30 – 60 days, APSCo has warned that the middle-supplier is the firm out of pocket for an increasing length of time.
According to APSCo UK and APSCo OutSource, this isn’t sustainable in the current climate and is causing undue financial strain on often SME businesses.
Melanie Forbes, Managing Director of APSCo OutSource comments:
“Our members across both the outsourcing and recruitment sectors are reporting increasing payment term periods with end clients which is stretching the purse strings of small to medium size businesses that often face footing the initial bill for large swathes of contractors without quick reimbursement. It’s common to see second tier suppliers bridging a payment gap of up to three months due to terms imposed on them or the managed services provider (MSP) by the end client.
“In order to ensure fair and prompt payment terms across the recruitment supply chain, we believe a number of changes are necessary, including amending the current regulations to ensure more accurate reporting is required. This includes payment practices and performance reports being included in director reports in order to hold firms accountable for prompt payment. We also believe it should be written into regulation that the total value of payments due that have not been paid within the agreed terms should be reported on to ensure long payment terms aren’t hidden in prompt payment reporting.
“Clarity around payment dates used for reporting across supply chain finance is also needed. Pay when paid terms are a risk to the stability of the supply chain and the second tier supplier faces a potential loss of control around the payment and the contractual right to enforce the debt owed when unpaid. We believe that the regulations should require a qualifying business to separately identify payment terms on contracts where they require advance payment to workers or other suppliers in a chain, or it is a statutory requirement, as in the case of a supply of a contingent worker to an end hirer. It should also be a requirement to disclose the differential in payment terms between their terms and those of the party paying the worker or worker’s employer.
“With late payments a real concern for our recruitment and outsource members, the proposed amendment to position disputed invoices as a separate entity is welcome news, though we would recommend that this should include delayed payments due to complex billing processes.”
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The Association of Professional Staffing Companies (APSCo) is the trade association for the professional recruitment market. APSCo Global comprises APSCo Asia, APSCo Australia, APSCo Deutschland and APSCo United Kingdom as well as APSCo OutSource, the trade body for the RPO and MSP sectors.
Find out more: www.apsco.org
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