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Recruitment International
Audit and Compliance
Pay When Paid Contracts
Lynn Mildner – Towergate Credit
5th March 2013
Pay when Paid Contracts
Acronyms - Terminology
What are “pay when paid contracts”?
Why are they an issue?
Steps forward?
The Acronyms
GPS – Government Procurement Service
RPO’s – Recruitment Process Outsourcing companies
MSPs – Managed Service Providers
APSCo –Association of Professional Staffing Companies
ABFA – Asset Based Finance Association
ABL – Asset backed lender
What Are Pay When Paid Contracts?
Used by RPO’s , MSPs or “master vendors”
Agency supplying staff will not be paid until a third party
has paid them
Often “in full”
No end stop date
No contractual relationship with third party
No protection against third party insolvency
Why does this matter?
Staff are paid with no income from contract
Often no impetus to speed up payment from end client
Funding - Invoice discounters/Factors
Credit Insurers contractual principal/risk
The Construction Industry
Latham report and 1996 Housing Grants and Construction and
Regeneration Act
• Assumed to have outlawed pay when paid,
• Gives legalised framework - applied when third party insolvent
• No model for reform of recruitment industry
• Not reliant on cash flow funding
Progress– Apsco Code - Summer 2012
• Pay, or allow contact with third party by given date
• Most ROPs and MSPs sign up to new code
• GPS committed to eradicating pay when paid contracts
between agencies
• ABLs cautiously continue funding agencies
Beware the re-factoring date.......
Refactoring - c.123 days outstanding - deducted from new funding
Credit Insurance – principal/overdue reporting/claim failure
Double funding – the ABL dilemma.
Future Trends?
Self Bill – the back door to pay when paid?
Bill when third party pays
Credit Insurance – Self Bill endorsements specify “bill by”
Contracts - Dates must be reflect credit insurance/ funder
Invoicing period
Credit period
Further Information
Lynn Mildner – 07769880445
Business Manager Towergate Insurance - Credit
77 Leadenhall Street, London EC3A 3DE