how do I make a uk company pay up?

August 21, 2008 10:30 AM

how do I make a uk company pay up?

I have done some freelance work in the UK recently and one of the clients is late in paying my invoice.

I usually get clients to sign a timesheet, which I fax to a paye umbrella company that invoices them and (once the funds arrive) pays me. (they handle all my taxes without me having to found my own company.)

one of the clients hasn't paid the paye company and during conversations with other freelancers I found out this particular client has a reputation for paying up late. I also learned there is a uk law regulating that freelancers should be paid within thirty days but I'm sketchy on the details. this invoice is more than ninety days past due. I and the paye guys have chased the client numerous times via phone and email and usually have gotten the runaround between departments.

I just spoke to the guys at my paye company and they told me they're sending the client a "pay up or else" letter tomorrow. what exactly is "or else?" does this imply I need to get a solicitor if this letter fails to have the desired effect? how would you handle this situation? what do you recommend I do next (or different the next time around)?

we're talking about a mid-range four-digit number here, if that matters

posted by krautland to Work & Money (9 answers total)

Small claims court was very effective for us when we were owed money. We filed on the site and received a cheque six weeks later, all costs included.
posted by goo at 10:52 AM on August 21, 2008

I would ask the company that handles your payments. Since they're the ones getting paid (and then you) I would imagine they have a procedure in place for getting money, whether that involves solicitors or not.
posted by dirtynumbangelboy at 10:53 AM on August 21, 2008

I can only speak from my own freelancing experience, where the "pay up or else" letter basically says that unless the bill is paid by X date, I will send it to a collections agency which will result in them having to pay extra fees etc etc. I have only had to do this once, I shopped around and found a reputable no-cure no-fee debt collection agency (usually solicitors who set up in this business). I sent this agency various forms of proof of the debt which they requested (eg copies of previous invoices, emails in which they acknowledged receipt of the email, and so on). The agency collected on the debt within a few weeks, and charged the client extra to cover their own charges., though I understand that many agencies will charge a percentage of the total debt.

It's almost like some clients only take you seriously once you call in a debt collector. And yes, I 'lost' the client, but they had lost me as a freelancer long before because they never paid a single invoice of mine.

I have no idea of course, but I would imagine that the umbrella company have an ongoing association with a collections agency or can recommend one (if they don't take care of the whole business themselves).
posted by different at 10:56 AM on August 21, 2008

Ugh, that was gibberish, but I think I got my general point across!
posted by different at 10:59 AM on August 21, 2008

Well, it sounds like you should just wait for the umbrella company's letter to have its desired effect. If it needs to go beyond that, here are some thoughts.

I will say that, in my experience, the England and Wales small claims process is easy. You may want to think twice about giving up money to a collection agency (find out what happens if the business pays off the principal but not the collection agency's charges—I bet that means you lose some money).

For four figures you might want to think about getting at least a consultation with a solicitor, even if you intend to do everything else yourself. There are some potential pitfalls which could cost you a lot of money if you do it wrong.

Since the debt is over 30 days due, the Late Payment of Commercial Debts Regulations 2002 allows you to charge interest at a particular base rate plus 8 percent. There's also additional compensation you can add on of £70.

You should send a letter marked "LETTER BEFORE CLAIM" giving them 21 days to pay up or you will commence proceedings in county court. Mention that if they do not pay up they will have to pay your court fees, solicitor's fees, and interest. Don't do this until you are really ready to sue (after your solicitor's consultation if need be).
posted by grouse at 11:29 AM on August 21, 2008

we're talking about a mid-range four-digit number here, if that matters

The figure does matter, if you're taking court action. Claims for more than £5,000 are not normally allocated to the small claims track which people have been mentioning, they go to the 'fast' track, which is more convoluted and almost certainly needs a solicitor. Also bear in mind, if you have lengthy travel considerations, any contested case will be heard at the defendant's home court.

Though ideally your proxy company will deal with all this nitty gritty?

Collections options are basically:
1) employing a collector to call/write, threatening further action, while you add whatever interest/charges you can;
2) to stump up court fees, and go for a judgement. If the debtor then fails to follow the payment terms of the court order, you can pay further court fees for enforcement action against the debtor's assets/income. Taking court action requires serious thought on your chances of actually getting the debt and court costs back from the non-payer in the end - eg, if they go insolvent, you're unlikely to recoup anything.
posted by wilko at 3:23 PM on August 21, 2008

Yeah, wilko is right on the fast track issue. Although even if it is less than £5,000, there is no guarantee that it will be put on the small claims track—it usually will but a judge can choose to put it on the fast track anyway, or dispose of it before allocation. Remember, there is no "small claims court" in England, only a small claims track in the county court. This is why it's good to consult with a solicitor—you can lose more than your filing fee.
posted by grouse at 3:29 PM on August 21, 2008

.. that said, if the debt is over £5K you can always issue a claim for a portion of the debt under £5K (eg the first half of the work, etc) which will go to small claims, and then chase up the rest later. But as already said, maybe best to let your invoicer handle this (unless you're paying them extravagant fees to do so).
posted by wilko at 3:34 PM on August 21, 2008

If its £5k+ and they won't pay, speak to a lawyer - I'd look for one who specialises in commercial law. If it costs you £100 to get your money your still on top, if you have to go to court you can claim back the costs of the lawyer from the defendant (unlike in the small claims court). You can find details of lawyers across the UK from the Law Society.
posted by prentiz at 5:10 PM on August 21, 2008