Late payments from suppliers and payroll system issues cited as reasons for delays
Despite contract work being on the rise since the pandemic, freelancers often wait three times longer to get paid than full-time staff who earn a monthly salary. Research shows that this is due to firms struggling with cash flow and payroll issues.
The survey, conducted by embedded finance and payment solutions provider, Sonovate, showed that 53% of all small and medium-sized businesses (SMEs) use contractors. However, this number increased to 81% when looking only at medium-sized businesses.
More than a quarter (27%) of SMEs said it takes them over 90 days to pay their contract staff. This figure increases to 37% among medium-sized businesses (50 to 249 employees), even though they are expected to have more predictable cash flow and should be able to make more timeous payments.
Five hundred senior business decision makers were surveyed, and it was discovered that 28% cited cash flow as one of the main reasons for slow payments (rising to 33% among mid-sized enterprises). It was also found that 62% believed that these cashflow issues were caused by the knock-on effect of late payments from their suppliers and customers. Twenty-eight percent said that issues with payroll systems stopped them from paying contract workers on time.
Regardless of the clear need for good contractors, 39% agreed that failure to pay timeously might result in missing out on quality talent. A further 24% admitted they had lost contract workers as they couldn’t pay them on time.
Richard Prime, co-founder and co-CEO at Sonovate, said: “Despite the last few years accelerating the number of workers going freelance or contracting, they are consistently being paid late which is not sustainable for many people – particularly at the moment.”
“We know that contract workers are the future of the UK’s workforce, but with the cost-of-living crisis front of mind, 90 days is just absurdly long to wait for payment. Against the backdrop of this crisis, it is paramount that businesses have access to solutions that support them to offer fairer and swifter payment across the workforce supply chain.”