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How to deal with late payments from clients

Paystream News

Kerry Hull

Thursday 13th Jul, 2017

Are you always paid on time by your clients? If you regularly move between contracts, it's unlikely that every client you work with will pay you exactly on time, but what should you do when you haven't heard from them about a delay and you're left without payment?

For limited company contractors, late payments can cause cash flow issues leaving you having to rely on your savings until payment is received. Therefore it's important that you receive payment for your services as promptly as possible.

Limited company contractors and freelancers also need to be paid on time so they can pay the correct amounts of income tax and National Insurance in order to stay on the right side of HMRC.

So as a PSC contractor, what can you do when you haven't been paid on time?

Government wants large firms to report on how quickly they pay contractors

In April 2017, the UK government introduced measures that mean large businesses have to report twice a year on how quickly they pay their contractors. This move was designed to improve transparency and ultimately make conditions fairer for limited company contractors and other small business owners.

Small business minister Margot James stated: "It's completely unacceptable that small and medium-sized businesses are owed £26.3 billion in late payments, which hampers their ability to grow and has no place in an economy that works for all.

"Large businesses have an important role to play and the guidance published today will help them fulfil their responsibilities and improve payment practices across the board."

Even though tougher rules may have been introduced for large corporations, late payments can still be an issue, so what can contractors do?

How to respond when you haven't been paid on time

Although it can be incredibly frustrating if you haven't been paid on time despite carrying out all your duties as outlined in your contract, it's important that you remain professional and calm when contacting the client to find out why.

Getting in touch with them should be your first step, as there is a chance it could simply have been an administrative error that's resulted in you being paid late. Sending an email that you can keep a copy of or a letter via recorded delivery is the best way to do this, so that you have evidence of your contact in case the issue needs to be taken further. You should also follow this communication with a call, making sure that you keep a record of all calls made.

If after seven days you haven't received payment then send another email or letter letting the client know of the steps that you're planning to take. Make sure they know you'll be taking further action to recover the money that you're owed, as this might encourage them to pay you quickly to avoid any trouble.

Further action could include using a credit collection agency or HM Courts Service for recovering debts, MoneyClaim Online. However, this may not always work, meaning more drastic action may be needed and you may be forced to take the matter to court. Although this might not be something that you want to do, it's important to not give up on your fight to be paid for your work. Not only is it unfair on you and illegal for the client, fighting for your rights will go some way towards improving transparency and standards across the wider industry too.

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