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The Small Business Commissioner would help small businesses handle disputes over late payment and other supply chain practices that hit them especially hard. It would help small firms access advice, support, mediation and conciliation services, and have the power to look into complaints and report on its findings.
This is aimed at delivering on the Government’s pledge to provide a small business conciliation service and goes further to ensure it fundamentally tackles unacceptable payment practices that hit small firms.
Small Business Minister Anna Soubry said: "The Government is backing small businesses to grow and create more jobs and opportunity.
"Small businesses are owed £26 billion in late payments and spend millions more chasing down money they have already earned through hard work. This is simply unacceptable – it limits their growth and productivity, and can put an otherwise successful business at risk.
"The Small Business Commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table and sort out disputes at a fraction of the cost of going to court. It will also provide advice, investigate complaints and see where further action is needed to clamp down on unfair practices."
Name and shame
This is one of a number of measures to tackle late payment. The Small Business, Enterprise and Employment Act 2015 introduced a reporting requirement for the UK’s largest companies to report on their payment policies and practices.
The Small Business Commissioner will be able to use this data to name and shame those behaving badly and celebrate those leading the way by paying promptly.
The Small Business Commissioner will:
- be a point of first contact for small businesses and provide advice and support on how to avoid disputes with larger companies and on how to resolve them;
- offer access to mediation services to sort out issues quickly and affordably, at a fraction of the cost of going to court;
- investigate complaints over unfair business practices and regularly report its findings.
In July 2015, Bacs reported that small and medium businesses are owed a total of £26.8 billion in overdue late payments and that £10.8 billion is spent per year in attempts to recover overdue payments.
An FSB survey of its members in 2014 revealed that 51 per cent had experienced late payment within the previous 12 months.
Welcome
The initiative was welcomed by the Association of Recruitment Consultancies (ARC), but they felt that more action was needed.
Adrian Marlowe, Chairman of the ARC.
“Any help that can be given to smaller businesses that suffer through late payment must be a good thing and we support it wholeheartedly."
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Mr Marlowe said: “Each of these initiatives is commendable and a step in the right direction. Although none of these measures have yet been formalised and we imagine there are issues relating to each that are still to be resolved. A small business commissioner could also help in the context of the recruitment supply chain, where a recruitment agency supplies workers through a vendor or recruitment process outsourcing business (RPO) appointed by the client, but in this case a tougher independent plan we believe is needed altogether.
"Where a recruitment agency is dealing with an RPO it may not only face lengthy payment terms but those terms may also be conditional upon various technical provisions and, crucially, the RPO receiving payment from the client. These types of contract also often fail to include any obligation by the RPO to claim money from the client promptly.
“The result is that the recruitment agency is forced to obtain finance, whether to pay supplied workers or to fund its own operations, against a backdrop of uncertainty as to when it will receive payment, or even whether it will receive payment at all. In addition some RPOs use their position of advantage to foister finance services on the agency. This forces up costs and discourages more successful agencies from participating, reducing the opportunity for their candidates to find work and ironically reducing the client’s access to the worker market place. These practices are plainly unfair, benefit no one other than the RPO business model, and we would like to see contract clauses that work to that effect outlawed altogether.
“The answer is to legislate against these clauses first, and then if the new proposal is followed up, the small business commissioner can step in to help any agency that is being bullied in the way described.”
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Susie Hughes © Shout99 2015
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