Somebody always has to pay; why late payment practices affect more than just the business.

workign hoursYou don’t have to go far these days to hear talk of late payments, prompt payment codes and the cash flow implications that this has on sub-contract organisations.  And you don’t
need to walk much further to learn the concerns expressed around lack of policing on the prompt payment code,  questionable programs  put in place to meet the code and whilst contracts can state 30 day payments, that doesn’t mean that’s when the money will come in – after all there is more than one way to skin a cat and questioning variations, valuations and retention’s for a longer time than required are all tricks that some in the sector have been known to play.

What I’m interested in though is what happens next; we usually jump straight from payment terms to companies out of business to show the impact but I’m concerned that we are ignoring the steps in between and the very real harm that we are causing to individuals. After all, causing a company to go bust is one thing; knowing that you have significantly damaged the mental health, livelihood and life of a fellow human being is another. So let’s consider the effect of the late payment, not on sub-contractors as a group, but on the people within them.

Directors – Increasingly directors are telling us that they are losing sleep with the stress of ensuring that their businesses turn over enough money to cover the wage bill.  They are all too aware of how dependent they have become on their overdrafts simply because of late payment dates – especially where their works include the materials as well as labour. This kind of immense pressure can exacerbate pre-existing mental conditions, or even create new ones that wouldn’t have previously existed, like stress. If you think that is what you should expect when you start a business, I would ask – “Really? You should expect not to be paid for three, four, five, even six months and have to shoulder the additional cost?”  I don’t think so.

Office Staff – Hours are steadily increasing for office staff in sub-contractors’ offices. One Bid Manager laughed when I asked if he worked more than sixty hours a week… “and the rest!”  The problem being that, with cash flow so tight, sub-contractors cannot look at where they need support – they must focus on keeping costs down, even if that means working hours go up. This, again, can put people under a lot of stress and affect their work-life balance.

Crafts people – Those working on site generally have a fairly steady working hour arrangement; what we increasingly find though is that they don’t have the employment rights that go with it – this is something known as “false self-employment”. Now don’t get me wrong, there are many in the industry who are self-employed because they want to be and there’s nothing wrong with that. The problem arises where people who want to be employed work with a company for years without having an employment contract instead being forced to accept a self employed one, meaning that whilst they have no control over their working ours like a typically self employed person would do: – they are not protected by employment law so they cannot access holiday pay and often have to pay additionally to process their taxes.  Late payment terms are a significant contributor to this practice and, as a consequence, to  the effects it causes when individuals are overworked, undervalued and underpaid.

Now, of course, this isn’t to say that all sub-contract firms are perfect, but we all know that two wrongs do not make a right and the only way to rebuild trust within the sector is to start with those who hold the purse strings. Late payment terms are extraordinarily damaging to both the industry and the people within it – it is not acceptable that we do not consider the impact these have on individuals just because we don’t see it with our own eyes.  So if you know you are part of a system that contributes to late payments, then maybe it’s time you thought about the real impact of the work you do, especially if there’s a real chance that it can never be undone.