Recruitment International
Audit and Compliance
Pay When Paid Contracts
Lynn Mildner – Towergate Credit
5th March 2013
Pay when Paid Contracts
Introduction
Acronyms - Terminology
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What are “pay when paid contracts”?
Why are they an issue?
Steps forward?
Pitfalls
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
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Often “in full”
No end stop date
No contractual relationship with third party
No protection against third party insolvency
Why does this matter?
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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
CASHFLOW
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
BUT............
Beware the re-factoring date.......
Pitfalls
Refactoring - c.123 days outstanding - deducted from new funding
Credit Insurance – principal/overdue reporting/claim failure
Funder
£2200
Double funding – the ABL dilemma.
Agency£1000
RPO
£1200
Future Trends?
Self Bill – the back door to pay when paid?
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Bill when third party pays
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Credit Insurance – Self Bill endorsements specify “bill by”
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Contracts - Dates must be reflect credit insurance/ funder
agreement
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Invoicing period
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Credit period
Further Information
Lynn Mildner – 07769880445
Business Manager Towergate Insurance - Credit
77 Leadenhall Street, London EC3A 3DE