ARC supports latest government initiative for a small business commissioner
“Any help that can be given to smaller businesses that suffer through late payment must be a good thing and we support it wholeheartedly”, commented Adrian Marlowe, chairman of the ARC.
Continuing its focus on late payment and unfairness on smaller businesses, the government initiative is set out in a consultation published on 26th July, the objective being to help bring about culture changes in how businesses deal with each other in respect of payment. Recently the government also consulted on the idea of appointing representative organisations to take action on behalf of businesses affected by unfair payment terms in contracts, and considered outlawing certain types of unfair commercial terms. In addition it consulted on exposing bad payment practices by larger businesses.
“Each of these initiatives is commendable and a step in the right direction”, continued Marlowe. “Although none of these measures have yet been formalised and we imagine there are issues relating to each that are still to be resolved. A small business commissioner could also help in the context of the recruitment supply chain, where a recruitment agency supplies workers through a vendor or recruitment process outsourcing business (RPO) appointed by the client, but in this case a tougher independent plan we believe is needed altogether.”
Marlowe explained “where a recruitment agency is dealing with an RPO it may not only face lengthy payment terms but those terms may also be conditional upon various technical provisions and, crucially, the RPO receiving payment from the client. These types of contract also often fail to include any obligation by the RPO to claim money from the client promptly.”
“The result is that the recruitment agency is forced to obtain finance, whether to pay supplied workers or to fund its own operations, against a backdrop of uncertainty as to when it will receive payment, or even whether it will receive payment at all. In addition some RPOs use their position of advantage to foister finance services on the agency. This forces up costs and discourages more successful agencies from participating, reducing the opportunity for their candidates to find work and ironically reducing the client’s access to the worker market place. These practices are plainly unfair, benefit no one other than the RPO business model, and we would like to see contract clauses that work to that effect outlawed altogether.”
Marlowe concluded, “The answer is to legislate against these clauses first, and then if the new proposal is followed up, the small business commissioner can step in to help any agency that is being bullied in the way described. We have been running a campaign for change in this area for many years (indeed readers of the consultation will see that we are the only recruitment trade association named as participating thus far) and I hope that, with the focus firmly on fairness in payment terms this government in addition to its other initiatives, will bite the bullet on this specific issue and rule against unfair RPO practice once and for all.”