Late Payments in Commercial Transactions
The European Commission is proposing to revise existing EU rules on late payments in commercial transactions. The revision is set against the background of the current economic climate and the aim is to help companies (especially small and medium sized enterprises) by tackling a culture of late payments particularly within the public sector.
The proposal includes measures to shorten payment periods by public authorities, notably through provisions limiting payment periods to 30 days unless duly justified and the introduction of a fixed flat rate late payment fee of 5% of the amount invoiced.
The NHS European Office consulted widely on these proposals and has now produced a summary of the responses it received. These responses echoed NHS organisations' commitment to demonstrating public sector leadership through good payment practices. However, the proposed 5% fixed rate late payment fee (which is in addition to statutory interest and recovery fees) is seen by most to be an arbitrary and disproportionate penalty which could have un-intended consequences. Level playing field issues between the public and private healthcare providers have also been highlighted.
Senior European Policy Manager, Tracy Cook, delivered a presentation on both the EU Remedies Directive and the revision to EU rules on Late Payments in Commercial Transactions at a recent meeting of the Primary Care Trust Network's group of Finance Directors.
The proposal will be subject to changes and negotiations at EU level over the coming months, and the NHS European Office will be sharing NHS views with European decision makers during the legislative process. The new rules are expected to take effect in 2010.
Prompt Payment Code
In December 2008, the Department for Business, Innovation and Skills (BIS), together with the Institute of Credit Management, launched a new prompt payment code to tackle the issue of late payments to help businesses. By signing the code, an organisation commits to paying suppliers on time and according to their agreed terms, to give clear guidance to suppliers and encourage good practice through the supply chains. Signing the code does not add any additional burdens to an organisation’s payment policies but sends a signal that it will pay its suppliers in accordance with agreed terms. A number of Strategic Health Authorities, Primary Care Trusts, NHS Trusts and Foundation Trusts have already signed the code and other NHS organisations are encouraged to do the same.
The NHS European Office and the Department for Business, Innovation and Skills are looking for examples of best payment practice in relation to payments made across health bodies. If you have any good case studies or examples of payment best practice, please send these to Layla.mumtaz@bis.gsi.gov.uk, copied to Tracy.cook@nhsconfed.org