Advice - General / Late and problem payments
If payment seems to be delayed, do not hesitate to chase it up. Telephone or email a reminder, or do both. Late payment is at least as likely to be the result of inefficiency as deliberate procrastination and if you do not remind a client, it can disappear into a pile of paperwork or computer files.
Check with the accounts department (or the book-keeper of a small client) whether your payment is under way. Paying you is their job! Sometimes it's best to ask them to contact the person who commissioned you and ask them to hurry up approving the payment.
The more you delay the less likely you are to be paid. Do not get into the position of the freelance who continued to work for a client on the promise of payment and of more work - until they were owed £14,000. (They were lucky and were eventually paid, with the help of the NUJ's Freelance Office.)
Freelances who suspect clients are having financial problems should strive to get their money as soon as possible. Companies that are having financial problems do not always tell the whole truth.
In principle, it is legally allowed to claim statutory interest for late payment up to six years in the past if you are in England, Wales or Northern Ireland (five years in Scotland). Waiting this long is not recommended: see Invoice early and invoice often.
Basic steps to collect overdue payments
Accounts departments often react to a "statement" - that is, a dated document headed "statement of account" that simply lists each invoice that is currently unpaid with:
- the date of the invoice;
- the invoice number, if used;
- a brief description of the work - the slugline of an article for example;
- the amount of the invoice;
and at the bottom the total of the amounts due on the date of the statement. (Yes, you add up all one invoices if there is only one. This makes the accountants feel you speak their language.)
If they cannot pay
If a client cannot pay its debts the company goes into liquidation. As a "creditor" of a company in liquidation you join a queue, with the banks, the staff and the Inland Revenue ahead of you for whatever money is available. If any money is left after they've been paid, it is shared among the company's remaining creditors.
There is often little chance of a freelance receiving substantial payment - getting 10 per cent of what you are owed ("10p in the pound") is not unusual. But, still, make sure the liquidator or administrator has your details as well as comprehensive details of your claim. Make sure the liquidator acknowledges your claim as a valid one.
You can check the status of a UK company, and get the address of the liquidator if one has indeed been appointed, at the Companies House website (see the link below).
But most importantly, NUJ members should contact the Freelance Office for advice if they have reason to suspect that a client may be in financial trouble.
Clients who pay late must by law pay compensation and penalty interest.
The Late Payment of Commercial Debt (Interest) Act (1988) was amended in 2002 to include fixed penalties in addition to interest. For debt of less than £1000 the penalty is £40, rising to £70 for debts up to £9999.99 and £100 above that. Interest is payable at 8 per cent over Bank of England base rate. The penalties and interest apply to all businesses regardless of size.
The payment clock starts ticking when you deliver the work, or on the day when your client has notice of the amount they owe you - whichever is the later. If the client requires you to invoice them, they "have notice" when they receive an invoice.
The client then has 30 days to pay - unless the freelance and the client agree on a reasonable alternative period. Clients must not pressure freelances or attempt to impose unreasonable payment terms.
Be clear when you invoice for work that "payment is due within 30 days".
The UK government suggests this form of words on invoices:
We understand and will exercise our statutory right to interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.
But the law applies whether or not you mention it on an invoice. See the government and industry website www.payontime.co.uk (at the link below) and the Freelance Office has a full guide for NUJ members on using late payment legislation.
The NUJ's London Freelance Branch offers an online Interest and penalty calculator for freelances to work out the interest and compensation - see the link below.
How freelances can chase up late payers
- Invoice for the work done - include the above form of words if you have doubts about the client paying on time.
- Especially if you have doubts, invoice early and invoice often. If the client is late paying, you are likely entitled to at least £40 compensation on each invoice. So invoice separately for each piece of work!
- Issue a statement as above if payment has not arrived on the due date (usually 30 days after the invoice can reasonably be taken to have arrived). Definitely mention the Late Payment of Commercial Debts Act on this. Print and file a copy of the statement.
- You could legally add the compensation at that point. But you may want to give the client a grace period. You may want to telephone or email to remind them nicely. But if you speak to them, immediately after the call write down what you said and what they said, with their name and the time and date, just in case.
- If you have received nothing, say, two weeks later, issue a second invoice for the compensation and for interest (even if it is only a few pounds). See the interest calculator. With this invoice send a second statement, listing the invoice for the original amount and this new one for interest and compensation, and adding them up. From this point on, send everything directly to the accounts department, not to the editor or picture desk who may be tempted to put them in a folder called "later". From this point on it is best that you communicate about the late payment in question only in writing, keeping a copy of everything. You may want to resort to the theatricality of corresponding on paper.
- Most accounts departments pay up at this stage. But if there is still no response, the next stage is to send a letter on paper using the Royal Mail Signed For service (previously known as "Recorded Delivery": see the link below), giving 14 days' notice of your intention to go to court.
NUJ members who have provided a late payer with a statement setting out the interest and compensation due on the late payment, and still had no response, may now decide to hand the case over to the union. The Freelance Office has been very successful in retrieving debts by a simple exchange of letters or telephone calls. The Collect-o-Matic form makes the process much more efficient.
What's this Collect-o-Matic then?
The NUJ's London Freelance Branch provides an online service to help the Freelance Office help NUJ members claim from clients who still do not pay after being invoiced and statemented. The Collect-o-Matic form is designed to proofread the details before you send them, to save to-ing and fro-ing - find it at www.londonfreelance.org/collect.html. The full details you provide allow the NUJ to send a stiff letter on a member's behalf. If that does not work, the union can help members pursue clients in court - though this is not difficult to do yourself. Members who deal with claims themselves should keep the NUJ informed as they may need its advice or support later.
The small claims court
If you start court proceedings, for sums under £10,000 you will ask to use the Small Claims Court.
If your claim is about unauthorised use of an article or image, you will be using the "Small Claims track" of the "Intellectual Property Enterprise Court" (IPEC). This was set up after campaigning by the NUJ when the County Court started refusing to admit claims related to copyright as small claims.
If your claim does not involve your copyright - for example if you have not been paid what you are due for a day's work - then you use the normal "County Court Small Claims track".
In either case, the first step is to issue a summons, for which you have to pay a fee, which varies according to the size of the debt. In June 2020 it started at £35 for claims up to £300 and was £80 for claims up to £1000 (see the links below).
You can issue standard claims online - but not IPEC claims - at MoneyClaim (see link below) with a fee of, for example, £70 for claims up to £1500.
You can usually claim the fee back if the court finds in your favour.
The Freelance Office will send NUJ members a guide to taking a case through the traditional Small Claims process and will give you advice to guide you through what is, in fact, a very simple - though rather precise - procedure.
Note, though, that members who are claiming for copyright abuse are strongly advised to seek extra help from the NUJ.
The union can represent you at the hearing and provide expert witnesses, should you need them - for example where the value of lost transparencies has to be established.
Taking cases for amounts over £10,000 to the IPEC ranges from expensive to very, very expensive. Seek qualified advice before doing anything. In the Small Claims track you are almost entirely protected from having to pay the other side's legal costs if you lose. In the "full-fat" courts you are not.
Chasing payments is time-consuming, and if your client collapses financially you may never be paid. So do not let clients run up large bills.
If a client fails to pay, and seems to be in trouble, or simply to be unscrupulous, there is no point in continuing to work for them, even if you hope to gain favour and eventually payment. The chances are you will simply end up with an even bigger debt due to you.
- if a client's reputation is unknown to you check it out before agreeing to the work;
- negotiate and agree payment terms before agreeing to the work;
- try to get confirmation in writing that the client is satisfied with the work;
- always invoice on time;
- invoice for each piece of work individually;
- chase up payment as soon as it becomes overdue;
- do not continue to supply if the account is overdue; and
- finally - take action to collect debts.
You may find the occasional Attention! items run by the Freelance useful - see the link below.
The hard cases
Of course, a Small Claims judgment merely confirms what is owed: the money still has to be collected. This is the stage where you really want the power of the union behind you.
The NUJ has, for example, successfully used the threat of putting a publisher through liquidation proceedings to enforce a claim - a step that would be rather less credible coming from an individual. (To be sure, this approach works only on a publisher that wants to continue trading). It can also apply for liquidation to be delayed if it seems that offers a better chance of members being paid.
And a word of warning: just about the worst defamation you can make of a company is to say that it is insolvent when no liquidation order has been made. So in public discussion you must restrict yourself to the documented facts: what you invoiced for and how long ago.
Text © Mike Holderness & previous contributors; Moral rights asserted. The collection (database right) © National Union of Journalists. Comments to email@example.com please. You may find the glossary helpful.
The National Union of Journalists must not, can not and would not wish to dictate rates or terms of engagement to members or to editors. The information presented here is for guidance and as an aid to equitable negotiation only.
Suggestions apply to contracts governed by UK law only. In any event, nothing here should be construed as legal advice.