Thursday, 20 April 2017 15:45

Paying to Get Paid? Freelancers Targeted by Prompt Payment Fees

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New York publishing house Condé Nast has reportedly come up with a novel solution to the tricky issue of ensuring its contributors get paid on time.

As reported here, the magazine empire behind global titles such as Vogue, Vanity Fair, GQ and Tatler has decided to offer freelance writers an offer they cannot refuse - Condé Nast has very generously offered to pay invoices early, in return for a small reduction in the payment. Must be to cover all of the extra admin involved.

In other words, freelancers, you can now pay Condé Nast to get paid promptly for your work.

As a concept in credit control, these sorts of arrangements are far from rare. But they usually arise as prompt payment discounts offered by suppliers as an incentive for clients to pay up early, rather than as prompt payment fees imposed on suppliers for the privilege.

A Right to Payment

 In many jurisdictions around the world, anyone who supplies goods or services to somebody else has a right under contractual law to be paid within a certain period of time. Under UK law, payment terms are set at a default of 30 days between delivery and payment, although the law allows parties to negotiate longer or shorter terms between them if they choose to do so.

Late payment is a chronic problem for suppliers, contractors and freelancers, both in this country and abroad. In New York, where Condé Nast is based, the state government recently passed a law aimed at tackling non-payment of freelancers, requiring all freelance arrangements to be based upon a written contract with fixed payment terms. Failure to pay up within the agreed timeframe can now result in hefty fines.

Which begs the question - why would any freelancer take Condé Nast up on its early pay offer?

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Unfortunately, just because right to payment exists, it doesn’t mean large companies are always above abusing the system. Big corporations on both sides of the Atlantic are known to frequently insist on lengthy payment terms, with periods of 90 days or more not uncommon.

We don’t know the ins and outs of Condé Nast’s freelance contracts, but you can see how, if you have felt pressured to agree to long payment terms in order to get a gig, you might be tempted to accept the offer of an early payment fee later on if you need the cash sooner.

Securing Payment - On Your Terms

 There are three things for freelancers, and other suppliers, to take away here:

 

  • Stand firm on negotiating payment terms: This is often where credit control problems start for small suppliers. Yes you want that contract with a big player, but can your cash flow handle waiting three months for payment? Only ever agree to terms which work for you.
  • Prompt payment arrangements are YOUR tool: If you negotiate suitable payment terms, you should never feel pressured into accepting prompt payment fees in return for money that you are rightfully owed. However, if gaining payment on time is an issue and you do want to offer incentives to clients, offering a prompt payment discount can work in your favour. The key is to retain control, and only set the discount at a level you can afford.
  • The law is on your side in gaining payment: If a client does not pay on time, then there are clear protocols in place for recovering overdue debts. This also applies if your client happens to be abroad - and there is every chance that UK freelancers will do work for businesses like Condé Nast based in the USA and elsewhere. Reputable debt collection specialists like Safe Collections work in partnership with a network of professionals the world over, and can use these contacts to resolve payment problems swiftly and amicably.

Whilst we have nothing against companies choosing to offer prompt payment payment discounts we can't help but feel the way this has been applied is unfair on the very freelancers that Condé Nast relies on.

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