Late Payment

Almost all freelancers will have struggled, at some point, with a client paying them later than agreed. This can be because of a myriad of reasons so it can often feel easier to wave your rights to late payment compensation. But doing this simply allows the client to abuse another freelancer who might be put into a very difficult financial position by the same extended period without payment. 

Know your rights and use them.

By law, clients who pay late must pay compensation and penalty interest. 

The Late Payment of Commercial Debt Act (1988) was amended in 2002 to include fixed penalties in addition to interest. For debt of less than £1000 the penalty is £40, rising to £70 for debts up to £9999.99 and £100 above that. Interest is payable at 8 per cent over Bank of England base rate. The penalties and interest apply to all businesses regardless of size. There are some free websites that offer to calculate the amount owed, such as https://dontpaylate.uk/, however they cannot always guarantee a high level of accuracy so we recommend checking their figures using the most up to date base rate figures available on government websites.

 The client usually has 30 days to pay, however this can be changed to a different reasonable period if both parties agree. The client cannot put pressure on the freelancer to change the length of the period.

The British Government suggests including this on invoices, whether or not you add this to your invoice or speaker agreement the compensation law still applies:

Payment is due within 30 days of receiving the invoice and we understand and will exercise our statutory right to interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.

When you send your invoice, make sure the agreed period for payment is clearly indicated. If they then surpass the agreed period after receiving your initial invoice you can choose to offer a short grace period, but you should email them stating clearly that they have exceeded the date for payment. 

Once the grace period has finished, say one working week, you should then send them a new invoice clearly stating your right to compensation and that you will be including the penalty interest rate to the delayed payment. The new invoice amount should include both the compensation amount and the interest owed.

At this stage, most clients will comply and pay you the amount owed. If they do not, keep a record of all interactions you have had with them since sending your invoice and you may wish to consult the Government website on issuing a notice of intent to take the case to the small claims court to the client.  

For more information consult the Government's advice page: 

https://www.gov.uk/late-commercial-payments-interest-debt-recovery