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Freelancers wait three times longer for payment than permanent staff

SMEs are blaming cashflow issues for delays in paying freelance workers.

Research from finance and payment solutions provider Sonovate found over a quarter (27%) of small and medium-sized businesses (SMEs) admitted to taking over 90 days to pay their contracted workers, in comparison with permanent staff who were paid every month.

The figure rose to 37% for strictly medium-sized companies, with between 50 and 249 employees.

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The research showed 28% of SMEs and 33% of medium companies said cashflow issues were the reason for slow payments.

A further 62% attributed their cashflow issues to late payments from their suppliers and customers, while 28% said late payments were caused by payroll issues.

Dave Chaplin, CEO of contracting authority ContractorCalculator, said freelancers should receive more protection to prevent late payments from becoming a regular occurrence.

Speaking to HR magazine, he said: "Freelancers are small businesses and key drivers of the UK economy. As such, they should enjoy the same protection from bullying clients under contract law as any other small business. 

"I would urge freelancers to understand their rights by law and decide whether they want to play it soft or hard with a given agency or client. 

"I would recommend that a freelancer states his or her payment terms on the invoice and follows up on that invoice if it is paid late. For small, short contracts, you could ask for 50%-100% of the money upfront. It’s a good litmus test."

The research highlighted how popular freelancers were for businesses, with 53% of SMEs and 81% of medium-sized organisations  admitting to using contractors at some point.

Chaplin added that freelancers shouldn't have to bear the brunt of a financial squeeze.

He said: "We know that times have been tough for many businesses as the pandemic, Brexit and legislation like the off-payroll reforms have had a punishing impact. However, freelancers should not be punished and should be paid for the work they carry out and in a timely manner."

Richard Prime, co-founder and co-CEO of Sonovate, said businesses should manage their cashflow more efficiently so that freelancers don't have to suffer.

He told HR magazine: "Many businesses are facing their own challenges – especially when it comes to cashflow – and this is impacting the speed at which they’re able to pay their freelancers. This needs to change and key to this is helping the businesses to better manage cashflow.

"By embedding finance solutions, recruitment consultancies can give employers the tools and solutions needed to reduce pressures and ensure all their employees – be that full time or freelance – are paid in full and on time."