As a self-employed freelancer, being paid on time is imperative if you’re to pay your bills when you’re supposed to. Of course, this doesn’t always happen – which can be frustrating to say the least.
How do you respond to a late payment, though? Is it just par for the course, or do you have the right to be annoyed?
Well, the government’s stance is pretty clear, with the Fair Payment Code having been introduced to try and combat this exact issue.
What is the Fair Payment Code?
Quite simply, it’s a new voluntary payment code introduced to replace the previous Prompt Payment Code.
Its primary aim is to tackle the late payment of businesses, helping to support SME’s cash flow and incentivise good practice. The scheme, which is open to businesses of any size, rewards participants for adopting fair payment practices, operating on a tiered system:
- Bronze – for those paying at least 95% of all invoices within 60 days
- Silver – for those paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days
- Gold – for those paying at least 95% of all invoices within 30 days
Each award lasts for two years, after which it must be reapplied for.
The medal system provides businesses with an easy way to demonstrate that they uphold good payment practices.
How can the Fair Payment Code help freelancers?
On the most basic level, it helps freelancers in that it improves their cash flow, while also raising the bar for what can be considered ‘good’ when it comes to paying suppliers promptly.
The new code also matches what IPSE thinks should be the ambition of every business, and the fact that the awards need to be renewed every two years further incentivises those who join to maintain their standards, with the tiered system leaving room for meaningful progression over time.
Is the Fair Payment Code a legal requirement for businesses?
No, the code is entirely voluntary, and this limits its overall effectiveness.
The attainment of being on the code is a nice pull factor (or carrot), but there really isn’t a push factor (or stick), like if participation was mandatory for certain larger businesses.
As it stands, an FPC award is simply a badge of honour, and nothing more.
Can I make complaints about businesses under the Fair Payment Code?
Yes, there’s a complaints procedure with the OSBC to report those businesses which are failing to meet the standards required under their awards or that are not following the code’s principles of being clear, fair, and collaborative.
This procedure is the main form of redress under the code, and if a business is found not to be living up to the standards represented by its award, it can be moved down to a lower tier – or even kicked off the scheme altogether.
How can businesses apply to be a part of the Fair Payment Code?
It should be noted that previous signatories to the Prompt Payment Code do not automatically receive an award, so a new individual application will be required.
An expression of interest form must first be submitted to the OSBC, who will then send out an application form, along with supporting guidance which sets out the necessary evidence that should accompany a business’s application.
This evidence includes proof of a UK registered address, the business’s standard contract terms, two references from suppliers, and evidence of payment performance.
Any level of award can be applied for, provided the accompanying evidence meets the criteria.
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