Small Business Commissioner

The New Fair Payment Code

  • The new Fair Payment Code has a tiered system of Awards which is aimed at awarding best practice and driving improvements in payment performance.  
  • The Fair Payment Code introduces Gold, Silver and Bronze tiered Award categories underpinned by fair payment principles. 
  • The Fair Payment Code replaces the Prompt Payment Code. It is more ambitious, aspirational and robust. 

Healthy cash flow is critical for small business survival and growth.  Late and long payment times disrupt the cash flow cycle and can prevent a business from paying its bills, eventually leading to business failure. In 2023 15% of small businesses and medium sized enterprises cited cash flow and late payments as an obstacle to running their businesses.[4] 

The new Fair Payment Code has been launched to encourage businesses across the UK to pay promptly.  Businesses may now apply for the Award tier which best suits them: Gold, Sliver or Bronze. The tiered system of Awards is aimed at awarding best practice and driving improvements in payment performance. The three Award tiers are: 

  • Gold Award – for those firms paying at least 95% of all invoices within 30 days 
  • Silver Award – for those paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days 
  • Bronze Award – for those paying at least 95% of all invoices within 60 days 

In addition, every business granted an Award agrees to abide by the Code’s principles of being Clear, Fair and Collaborative with their suppliers. 

The new Fair Payment Code replaces the Prompt Payment Code. It will be more aspirational by supporting businesses which wish to improve payment practices and helping them move up from Bronze to Silver, and to Gold over time.   

The Fair Payment Code Awards are for two years, and every business will need to reapply for their Award at the end of each two-year period. There will also be a robust complaint system in place for businesses to highlight to the OSBC those not meeting the requirements of the category of their Award (Gold, Silver or Bronze) or not following the principles of the Code. 

Businesses can now apply of any Award level of the new Fair Payment Code.

 

Small Business Minister Gareth Thomas said:  

 

“Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse and today’s measures look to tackle the issue head on. 

 

“This government’s primary ambition is clear: to go for growth. To do that, we must unleash the potential of our entrepreneurs.”  

Liz Barclay, Small Business Commissioner said: 

 

“The Fair Payment Code is our response to all those suppliers who begged for a more aspirational, robust and ambitious approach to changing the business to business payment culture in the UK. It also gives a clear signal of intent on the part of Government.  

 

We want suppliers paid within 30 days with payment beyond the due date a rare event. We want longer contractual payment term to be recognised as potentially detrimental to vital supply chains. We want businesses of all sizes to commit to fair and quick payments and to avoid harmful disputes. This new Code will drive a better payments culture and benefit everyone.” 

Andy Chamberlain, Policy Director at IPSE (The Association of Independent Professionals and the Self-Employed) said: 

 

“IPSE research shows that more than half of all freelancers have suffered from late payment in their career, with the average amount owed totalling over five thousand pounds. 

 

“IPSE supports the government’s new Fair Payment Code which will encourage 30 day payment terms, which we believe should be standard practice. The new Code is an important step in the right direction.”  

Terry Corby, Founder and CEO, Good Business Pays said:  

 

“Set up four years ago Good Business Pays campaigns on behalf of small businesses to make sure they get paid faster. The new Fair Payment Code will address much more that fair payment times, it will be making sure that small businesses get fair payment terms. Good Business Pays supports the new Fair Payment Code and encourages business of all sizes to apply.” 

Craig Beaumont, Executive Director at the Federation of Small Businesses said: 

 

“For those who pay small suppliers quickly, we think the launch of a strong and credible Fair Payment Code is a major step to strive for best practice; a competitive race for the top, rather than the bottom, that boosts GDP and cuts back on wasted time and needless stress.  We hope to see the best of UK corporates sign up to demonstrate commitment to their supply chains, and to the Good Business agenda.”   

Carol Daniels, Operations Director at the National Enterprise Network said: 

 

“The National Enterprise Network wholeheartedly welcomes the new Fair Payment Code. For small and micro businesses, cash flow management while waiting for invoices to be paid is a constant worry. Many feel forced to accept long payment terms—sometimes 90 or even 120 days—out of fear of losing work. This practice needs to stop. It’s a damaging culture, pushing small firms to the brink and impacting mental health. The introduction of this new Code is a significant and much-needed step in the right direction.” 

Ian Cass, Managing Director at the Forum for Private Business and Chair of the Micro Business Alliance said: 

 

“For many years we’ve been pushing for a rewrite of the Prompt Payment Code, as well as better behaviour from those who sign up to it. We are fully supportive of the Small Business Commissioner’s work on this.  

 

Small and micro businesses constantly live in a state of fear and perpetual jeopardy of late payments but are unable to refuse the work even if the customer is offering long and unfair payment terms or is renowned for paying late, as this is preferable to losing the client and critically impacting on cash flow. We need to challenge this culture more robustly, and the new Code is a clear indication that poor payment practices are no longer acceptable”. 

Kate Hayward, UK Country Manager at Xero said:

 

“We see day in and day out the devastating impact late payments have on small businesses; what we prefer to call ‘unapproved debt’. And our data shows it’s not getting any better. That’s why we welcome the strengthened Fair Payment Code and hope it can help towards shifting the unacceptable culture around late payments. Now we all need to make sure big businesses aspire to be part of the code and pay in 30 days, no excuses.”   

Steve Hare, CEO of Sage said: 

 

“At Sage, we understand that timely payments are essential for SMBs to thrive and drive economic growth. That’s why we support the new Fair Payment Code.  

 

By embracing technologies like e-invoicing, these businesses can streamline their payment processes, making it easier to get paid on time and strengthening their cash flow.” 

Hannah Bernard, Head of Barclays Business Banking said:   

 

“Barclays Business Banking has been a long-time champion for the prompt payment of SMEs. With over one million small business customers, we know the negative impact late payments can have on income and cash flow.  

 

We’re in full support of this announcement of a new Fair Payment Code and are keen to help the new Government and the Small Business Commissioner to put an end to late payments and ensure that businesses of all sizes recognise the importance of paying responsibly to better support the SME ecosystem.”