Fair Payment Code

In September 2024 the UK government announced it was to crack down on late payments with a package of new measures aimed at tackling scourge of late payments in support of small businesses. One element of this included a new Fair Payment Code, refreshing the rules on company reporting, launched in Autumn 2024, along with a major consultation on tackling late payments.

The new Fair Payment Code is open to signatories from autumn 2024 and being launched by the Small Business Commissioner, with the support of the Department of Business and Trade. It seeks to "to address issues raised by stakeholders with the Prompt Payment Code and aims to be more ambitious, aspirational and robust". The changes to this code, relate to but do not have a bearing on the requirements under the Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024, which are effectively separate. Stepping up of enforcement on the existing late payment performance reporting regulations was however also announced, these now require large companies with more than 500 employees to report their payment performance twice a year.

The Fair Payment Code replaces the old Prompt Payment Code, which has been operational since 2008 with more than 5000 signatories, where firms committed to paying at least 95% of their suppliers within 60 days and 95% of small suppliers within 30 days. Feedback from stakeholders highlighted a number of issues with the Prompt Payment Code’s operation which is said to have been affecting its effectiveness. The replacement code will be designed to push businesses to pay faster more often, and prove they have met good payment standards before being awarded official code status, of either gold, silver or bronze status. It will also shine a light on those responsible businesses doing the right thing by their suppliers and small firms.

The new Fair Payment Code will include a set of fair payment principles that companies are required to sign up to, as well as three award categories whihc will be as follows:

• Gold – For companies paying 95% of their suppliers within 30 days
• Silver – For companies paying 95% of their small business suppliers within 30 days and all other suppliers within 60 days.
• Bronze – For companies paying 95% of suppliers within 60 days.

Prime Minister Keir Starmer said, at the time of the launch:

"We’re determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this. We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse. After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all."

Business Secretary Jonathan Reynolds said:

"Late payments are simply unacceptable and this government is determined to level the playing field for small business. When the cashflow runs dry, small firms go under which is why we need to hold larger business to account with their payment practices and foster an environment that supports growth and jobs. Slashing trade barriers, reforming business rates, getting more SMEs exporting – this government is committed to small firms. We know there’s a lot more to be done, but today we are calling time on late payers once and for all."

The Small Business Commissioner, Liz Barclay, said:

"I am delighted to announce a new Fair Payment Code will be launched this autumn. The new code will reward businesses that treat their suppliers fairly and pay them quickly. It will also include an ambitious new Gold Award which aims to make 30-day payments the new standard for which businesses can aim. We need sustainable, resilient businesses at all levels of the supply chains, to achieve the growth the economy needs. That means paying everyone from the largest supplier to the sole trader quicker, so they have the confidence to invest, improve productivity and grow. Fair payment terms and on time payments are the key."

[edit] Related articles on Designing Buildings

• Cash flow.
• Causes of construction disputes.
• Collaborative practices.
• Construction client's charter.
• Construction supply chain payment charter.
• Fair payment practices.
• Housing Grants, Construction and Regeneration Act.
• Insolvency.
• Net zero commitment will be required for major government contracts.
• Procurement policy note PPN.
• Prompt Payment Code boosted to help SMEs.
• Prompt payment code: the story behind the headlines.
• Progress on poor payment practices.
• Project bank accounts.
• Remedies for late payment.
• Scheme for construction contracts.
• The Late Payment of Commercial Debts Regulations 2013.
• The Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024.

[edit] External Links

https://www.smallbusinesscommissioner.gov.uk/new-fair-payment-code/

https://www.gov.uk/government/news/crack-down-on-late-payments-in-major-support-package-for-small-businesses

https://www.gov.uk/government/publications/late-payments-research-performance-and-practices-across-business

https://www.fsb.org.uk/resource-report/time-is-money.html

https://cms.smartdatafoundry.com/wp-content/uploads/2022/11/221103-late-and-slow-payments-part-one-Final59.pdf