Best and Worst cities for timely contractor payments

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There are many benefits of contracting over permanent employment: the ability to work flexible hours, fresh and exciting challenges, and higher pay rates, for example. However, there are a few areas where contracting certainly has its own difficulties, and, as many contractors will know, invoicing is one of them.

UK payment terms state that contractors must be paid for their services within 30 days of invoicing. Of course, contractors can include their own payment terms, giving their clients a little longer — perhaps 60 days. However, cloud services provider Freeagent claims that 50% of invoices are not paid on time.

Late payments tend to be prevalent in some cities more than others. The Free agent report shows that Manchester and York typically contain the most prompt payers, with Sheffield struggling to keep up.

The Best Cities for Contractors

Here are the percentages of invoices paid within 3 days of due date across different UK cities:

• Manchester: 79%

• York: 76%

• Leeds: 72%

• St Albans: 67%

• Coventry: 61%

• Nottingham: 60%

• Peterborough: 30%

• Sheffield: 29%

Payments may be slightly quicker if you’re providing services to Government departments. Sadly, Peterborough is still down towards the bottom of the list with a 38 day average, although Stirling Council gets a gold star for being on time. 16 days is the average payment time for Government contracts.

Name and Shame

Recently, Government reports have started to ‘name and shame’ some of the biggest offenders for late payments. The good news is that the technology sector certainly does not appear to be the worst! In fact, many technology and tech-related companies have been shown to pay the majority of their invoices within the agreed payment terms. This includes the likes of Cisco, Google, and Finastra, whose late payment percentages all come in below the national average, which stands at 52%.

Impact on Contracting Landscape

It’s reported that the average UK contractor is owed £5431 in late payments, and that 46% of contractors worry about money. However, more than half feel uncomfortable chasing clients for overdue payments, which results in only 40% of unpaid contractors taking out a County Court judgement each year.

This could potentially have a huge economic impact, especially at a time when the Government is striving for a flexible labour force to meet evolving demand. Businesses, and indeed the Government, are being urged to do more to support and encourage this and the next generation of skilled contractors.

New Trends

Late payments are changing the contractor landscape, with new trends being introduced to address common contractor issues and minimise risk. While still rare in the UK, some contractors are now beginning to introduce new terms to their invoices, including a ‘prompt payment discount’.

The prompt payment discount is commonly used across many other European countries, including Germany, Holland, France, and Italy. Typically, a 2% or 3% discount is offered for businesses paying within 14 days. It is expected that contractors may begin using similar methods to reduce risk in the future.

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