The Small Business Commissioner, with the support of the Department of Business and Trade, will be launching a new Fair Payment Code later in 2024. The new Code will reward business for adopting fair payment practices for suppliers of all sizes and small suppliers in particular.

The new Code will include a set of fair payment principles that companies are required to sign up to, as well as three award categories:

  • Gold– For companies paying 95% of their suppliers within 30 days
  • Silver– For companies paying 95% of their small business suppliers within 30 days and all other suppliers within 60 days.
  • Bronze– For companies paying 95% of suppliers within 60 days.

The new Code will replace the Prompt Payment Code which has been operational since 2008. There are more than 5000 signatories to the existing Code, where firms which have committed to paying at least 95% of their suppliers within 60 days and 95% of small suppliers within 30 days.

However, during consultation with stakeholders several issues were raised with the design, operation and effectiveness of the Prompt Payment Code.

The new Fair Payment Code will be more ambitious in setting higher standards including an exemplar ‘Gold’ category for those firms paying suppliers within 30 days. This goes beyond the existing Code’s requirements. The new Code will also 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. There will also be a more rigorous application process, a two-year limit on awards and a more robust approach to enforcement.

The Small Business Commissioner, Liz Barclay, said: “I am delighted to announce a new Fair Payment Code will be launched this autumn. The new code will reward businesses that treat their suppliers fairly and pay them quickly. It will also include an ambitious new Gold Award which aims to make 30-day payments the new standard for which businesses can aim.

“We need sustainable, resilient businesses at all levels of the supply chains, to achieve the growth the economy needs. That means paying everyone from the largest supplier to the sole trader quicker, so they have the confidence to invest, improve productivity and grow. Fair payment terms and on time payments are the key.”

Minister for Small Business, Gareth Thomas MP said: “Small businesses deserve to be paid on time, it’s as simple as that. I’m optimistic that today’s first big step will help pave the way for real change that supports SMEs to thrive and help to grow our economy.”

Frequently Asked Questions

What has been announced?

The Small Business Commissioner, with the support of the Department of Business and Trade has announced that a new Code will be launched to replace the Prompt Payment Code. Details of the new Fair Payment Code will be announced later in the year.

What has changed?

Nothing has changed for the moment. It has simply been announced that a new Code will be launched to replace the Prompt Payment Code. The Fair Payment Code will be launched later in the year and full details of how to apply for the new Code will be made available at that time.

Can I still sign up to the Prompt Payment Code?

The Prompt Payment Code remains open for signatories, but will be suspended and eventually closed once the new Fair Payment Code is launched. Companies can still apply to the Prompt Payment Code but should be aware that this will change later in the year. Companies expressing an interest in the Prompt Payment Code, as well as existing signatories, will be contacted with details of how to apply for the Fair Payment Code once it is launched.

Why is this change happening?

Feedback from stakeholders highlighted a number of issues with the Prompt Payment Code’s operation which is affecting its effectiveness. A new Fair Payment Code will be more ambitious in setting higher standards, aspirational by supporting business improve payment practices and have more a more robust approach to compliance and enforcement.

Does this impact my requirements under Prompt Payment Reporting Regulations?

The Prompt Payment Code and the new Fair Payment Code do not have a bearing on the requirements under the Prompt Payment Reporting Regulations which are separate. It was announced that enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies with more than 500 employees to report their payment performance twice yearly on GOV.UK.

Responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.

Details about these requirements are available here.

What will be the new Code’s criteria?

Full details of the new Fair Payment Code, including the fair payment principles that underpin it will be announced later in the year. Three new Code will have three award categories Gold, Silver, and Bronze (as mentioned above).

Details of the application process and supporting guidance for companies wishing to apply will be published later in the year. All existing signatories, and other companies interested in the new Code, will be contacted with details when it launches.

Being a code signatory is a requirement in my contract, what does it mean?

No immediate changes have been made to the Prompt Payment Code. Full details of the new Code and transition from the Prompt Payment Code will be announced later in the year. The specifics of any contract are between the parties involved and should be discussed directly.

www.smallbusinesscommissioner.gov.uk