Self employed - can company pay me on time but less than agreed?

Deastons

A friend of mine is self employed (a small limited company) and recently did some work for a very large, national company.

The terms of their payment on the invoice says 30 days. The large company has come back saying that my friend has two options:

1. Be paid within 30 days but with a 5% reduction
2. Be paid in full in 90 days

I said this isn't right and they must pay within 30 days as those are the terms on your invoice. Is this correct?

Comms69

Firstly is he self employed or running a small limited company?

sangie595

It's irrelevant. It's take him pretty much most of the 90 days to take it to court, it's small potatoes and not worth the hassle of doing, and if he takes them to court then he'll never get any work with them again. Not really fair, but life isn't, and they know all this so the company don't care. They are big enough to roll straight over him, and that's what they are doing.

But if he's intent on taking this further he must wait until the 30 days are up. Then he must send a letter before action which allows them time to pay (21 or 28 days being usual). And then if they haven't paid at the end of that he can begin legal action. Of course, that will be most of the wayto the 90 day mark!

Deastons

Comms69 wrote: »

Firstly is he self employed or running a small limited company?

I'm not sure about your question - I'm assuming your point is that they're two different things? He runs a small limited company.

Deastons

sangie595 wrote: »

It's irrelevant. It's take him pretty much most of the 90 days to take it to court, it's small potatoes and not worth the hassle of doing, and if he takes them to court then he'll never get any work with them again. Not really fair, but life isn't, and they know all this so the company don't care. They are big enough to roll straight over him, and that's what they are doing.

But if he's intent on taking this further he must wait until the 30 days are up. Then he must send a letter before action which allows them time to pay (21 or 28 days being usual). And then if they haven't paid at the end of that he can begin legal action. Of course, that will be most of the wayto the 90 day mark!

So what they're doing is not correct? As in, if it did go to court, my friend would win?

This company does it with all the people they use, so they're considering taking some sort of action.

Gavin83

Firstly can we just establish if this is for you (as per your title and last paragraph) or for your friend?

You (or your friend) have an issue here. Let's say you demand they pay the full amount in 30 days and they refuse, then what? Well the clear option is to take them to court. However this process will take longer than 90 days until you get your payment, somewhat ruling this out. The company know what they're doing, basically just trying to get a discount, knowing there's little you can do about it owing to their 90 day payment offer.

You could potentially take the 5% reduction and sue them for it but this of course depends if the 5% makes it worth it, plus I'm almost certain they'll get you to sign something agreeing to the reduction.

I guess your action depends on how desperate you are for the money. Oh, and never work for this company again.

nicechap

Other options include, inflating invoices by 5.26% before they apply 5% discount to leave you in same position.

Amending the payment terms to paid within 30 days of invoice or 8% p.a. from date of invoice will be added for all payments made beyond 30 days, or words to that effect.

8% is the usual interest allowed by courts.

As suggested above, the time delay and hassle of taking a customer to court, who may then not offer you work again, needs to be weighed up in the business calculation.

Deastons

Gavin83 wrote: »

Firstly can we just establish if this is for you (as per your title and last paragraph) or for your friend?

You (or your friend) have an issue here. Let's say you demand they pay the full amount in 30 days and they refuse, then what? Well the clear option is to take them to court. However this process will take longer than 90 days until you get your payment, somewhat ruling this out. The company know what they're doing, basically just trying to get a discount, knowing there's little you can do about it owing to their 90 day payment offer.

You could potentially take the 5% reduction and sue them for it but this of course depends if the 5% makes it worth it, plus I'm almost certain they'll get you to sign something agreeing to the reduction.

I guess your action depends on how desperate you are for the money. Oh, and never work for this company again.

This is for my friend, but I also regularly work for this company hence why I have a particular interest. Not working for this company is not possible as they're the largest in our industry - a PLC with £3bn+ turnover.

This is a relatively new thing the company have introduced, so I've not been directly affected yet.

I'm trying to establish whether, after the work has been done and contrary to the terms of the contract between the two parties, the company can legally do this.

If not, we may indeed take it further. Not just for my friend, but for all of us.

MEM62

Deastons wrote: »

A friend of mine is self employed (a small limited company) and recently did some work for a very large, national company.

The terms of their payment on the invoice says 30 days. The large company has come back saying that my friend has two options:

1. Be paid within 30 days but with a 5% reduction
2. Be paid in full in 90 days

I said this isn't right and they must pay within 30 days as those are the terms on your invoice. Is this correct?

Your friend is either self employed of an employee of her Ltd company.

As for the payment terms, stating 30-days on the invoice is of limited use as the work has already been done by the time that the invoice is issued. What is important is the agreement/contract made before the work was done. What does this say?

The, somewhat draconian terms, stated by her supplier are actually not unusual. We deal with a could of larger corporations that want the same terms. In cases where we cannot obtain agreement based on our normal 30-day terms I simply increase my selling rates to account for the cost of the interest.

agrinnall

If your friend and you need to have this company as a client in the future then I can't see that there is any option other than to accept the terms, if you/she take them to court to challenge the terms then win or lose there will never be any work available again. So the real decision to be made is whether to be paid in 30 days or 90 days - personally, I'd go for 90 as a 5% cut in payment is massively more than anything that could be earned with the money except for the most extreme gambles (stock market or horse racing, take your pick).

sangie595

So you have no choice other than to accept work from this company? In which case the answer is clear- no, there is nothing you can do about this because you won't be working for them again if you do. If you can determine the pay rates you could, as suggested, add 5% on to invoices. But I suspect you can't, and that there will be plenty of other people willing to take up the slack if you don't work for them.