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REC warns members about Pay when paid clauses

REC warns members about Pay when paid clauses
Pay when paid clauses in contracts are a growing concern for recruiters operating through intermediaries such as vendors and RPOs. The finance community and those representing the invoice discounting industry are also concerned with the risk that these clauses are creating.  The REC is continuing to tell its members to think very seriously before signing any contract with a pay when paid clause included.
The REC has been in dialogue with the Asset Based Finance Association (ABFA) on this issue. Historically, invoice discounters have regarded staffing companies as low risk customers. However, the supply of agency staff via intermediaries such as vendors means that the risk of non-payment of invoices is now much greater.  
Pay when paid clauses may make it impossible for the financing organisation to enforce payment of an invoice in circumstances when the intermediary has agreed with the end user not to pursue payment. A further risk factor is that some RPO businesses and vendors are themselves making use of invoice financing which means that financiers are advancing more than once against the same invoice. According to ABFA, the net result is an increased risk to their members which is making it harder for recruitment providers to obtain finance or maintain funding at the same rates.
The REC has met some vendors and RPO organisations it is encouraging them not to include these clauses as they do not support a healthy and sustainable supply chain.  
It is also talking to the banks in its sector to ensure they take a pragmatic and balanced approach to this issue and dont withdraw funding from second or third tier recruitment businesses
Commenting on the issue, Kevin Green, the RECs Chief Executive Kevin Green says:
Pay when paid clauses are not good news for our industry. It is crucial that the REC is at the forefront of this debate. We are fully engaged with the finance sector and intermediaries on this issue.
Following discussions with our Employment Policy Committee we will be seeking additional feedback from our members on possible solutions including framing RPO contracts so that clients and secondary suppliers have a direct payment relationship.
"Invoice financing is an important tool for our industry we will continue to engage with clients, vendors and the finance sector to develop a workable way forward.
The REC is seeking member feedback on this issue. If REC members can provide specific examples of these clauses being enacted or banks removing finance, they can email


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