Almost no business is without its fair share of difficulties and restrictions; however, being paid for services that have been provided should not be one of them. Unfortunately it appears to be common practice for UK recruiters to be taken for a ride when it comes to receiving payment for services rendered. Why is this occurring, and even more importantly, what effect is it having on recruiters?
Based on data gathered by EMW law firm, recruiters are having to wait an average of 56 days before receiving payment for their services. This is more than double the average time it takes for other UK businesses to be paid. What’s amusing is that this is actually an improvement from the 68 day average it was taking UK recruiters to get paid back in 2010/11. However, it doesn’t justify the lateness in comparison to the national average.
Now that the statistics have established that recruiters are being unfairly penalised, why exactly is it this particular sector which is having this problem? Unfortunately no one seems to be able to provide a satisfactory conclusion and we can only speculate that the most likely reason is because clients are prolonging payment with almost no repercussions.
In accordance with the EU’s late payment directive limit of 60 days, recruiters can impose an interest charge for owing balances. However, this seldom occurs as recruiters feel it will tarnish their relationship with the client. Furthermore, because many recruiters are franchisees or SME’s with a limited client base they do not want to do anything to jeopardise that standing.
What are the ramifications for recruiters receiving a late payment?
- Disrupts cash flows
- Plans for growth are stalled or never realised at all
- Employee wage payments may get delayed
- Reduces profitability and portrays company as making a loss
- Recruiters also begin to carry debt and have trouble paying their costs
- If continuously recurring it may lead to bankruptcy
Recruiters can and should take steps to minimise outstanding payments. A good first step is when recruiters are taking on a client they should establish clear guidelines regarding payments. They have to be firm in enforcing their late payment procedures and if they are having difficulties then maybe look at how they can improve their credit control by outsourcing elements of their finance and accounts provision.
Agencies can also look at outsourcing back office services in order to streamline operations and minimise expenses. Companies can even take it a step further and begin to off shore other recruiting services like CV searching and database cleansing. Implementing some of these services will begin to free up resources, which can then be utilised to search more candidates and even consider expanding business opportunities.
If you are thinking of recruitment outsourcing, please call us on +44 845 838 2462 or email us: firstname.lastname@example.org for a confidential and no cost discussion.