When freelancers get paid late the economy suffers: Photo by Nicola Barts via Pexels
Freelancers should brace for more late payments in 2025 as the hiring surge risks payment delays. Here’s what to do about it
Nearly half (45%) of UK businesses plan to hire more freelancers this year, as one in four UK workers are now considering going freelance for greater flexibility and to pay for higher bills. While that sounds promising, one has to take into account freelancers being paid late has become commonplace. If history repeats itself, it will only get worse as more people in the UK turn to freelancing.
Looking ahead, there’s a valid concern that late payments could become an even more significant issue for freelancers in 2025. This is partly fuelled by the increasing trend of companies turning to freelancers and contractors. While access to specialised skills and project-based flexibility are key drivers, the potential for companies to reduce employer tax burdens remains a significant driver.
More freelancers, more invoices more problems
As more companies engage freelancers, the sheer volume of invoices could strain existing accounts payable processes, potentially leading to more administrative delays. While the government is taking steps to address late payments for small businesses in general, the specific nuances of the freelancer-client relationship and the potential power imbalance need addressing.
Sadly, the data suggests this isn’t just paranoia. A recent report says that a staggering 85% of freelancers worldwide have experienced late payments at least some of the time, with over 21% facing this issue more than half of the time. These aren’t just minor inconveniences; they represent real threats to our livelihoods and financial stability.
In fact, 62% of UK small businesses surveyed reported being owed money, with the average amount standing at a concerning £21,400. Over half of these businesses had invoices overdue by more than 30 days. As the Federation of Small Businesses (FSB) has previously described, late payments remain “one of the biggest problems facing SMEs.”
The Labour government has acknowledged the severity of this issue. Back in September 2024, the government unveiled a “major non-financial support package for small businesses“. At the time, the government stated that the “scourge of late payments costs SMEs £22,000 a year with 56 million hours of lost productivity… acting as a major brake on growth.”
But time is not on the side of freelancers already grappling with late payments and the rising cost of living in the UK. They can’t wait in the hope that new laws will actually penalise the firms that pay them late.
Fair Payment Code: is it working?
As part of this Support package, a new “Fair Payment Code” was launched in December 2024. This code introduces a tiered system (Gold, Silver, Bronze) to recognise companies with good payment practices, aiming to help smaller firms identify reliable clients. The government hopes this will “boost cash flow for small businesses which is crucial for their survival, by tackling late payments and lengthy payment terms that can lead to financial strain and failure.”
This code is an honour system. That means it is unlikely to move the needle as much as freelancers need to address
Larger companies must report their payment behaviour
Enforcement of existing late payment performance reporting regulations for large companies is being stepped up. Under these rules, “responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.” This demonstrates a stronger stance on holding larger businesses accountable for their payment behaviour.
But which companies are in scope so freelancers understand their rights and also which companies might become better payers as a result of these new rules?
Under The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, the thresholds defining a medium-sized company are changing. This change affects the thresholds for reporting payment practices, since this definition is used to determine which businesses are in scope of the regulations.
From 6 April 2025, the thresholds for reporting payment practices are:
- £54 million annual turnover (up from £36 million)
- £27 million balance sheet total (up from £18 million)
- 250 employees (unchanged)
Businesses that meet 2 or all 3 of these criteria will be in scope to report their payment practices.
Freelancers must collectively take control
What can freelancers do to pre-empt late-paying clients? The key lies in taking proactive steps to protect our cash flow and assert our rights as independent professionals.
However, before you start questioning whether these steps will hurt your chances of becoming engaged by new clients, switch to business owner mode.
- Every time you start to get insecure, think as if you are a seller of products and would never dream of giving away your product before getting some form of payment.
- Also, why are you giving away your product or service on 0% interest-free credit? Think about it, clients who say they can only pay you on or after 30 days from the day they receive your product or service are asking you to give them interest-free credit. And freelancers are falling for it. Are you a bank? A lender? Klarna? No.
Here are ways to help you get paid on time as a freelancer
Demand a deposit: It might feel uncomfortable, especially with new clients, but requesting a 25% deposit before commencing any significant work is a crucial safeguard. Many companies might initially push back, citing their “accounts payable policies.” However, as freelancers, we must politely but firmly make it clear that this is a standard part of our terms. Frame it as a commitment from their side and a way to ensure the project’s initiation. Even a partial payment upfront provides a buffer and demonstrates the client’s seriousness.
Make YOUR payment terms crystal clear: Don’t leave payment terms as an afterthought. Clearly outline your expectations in your contracts, including payment due dates (e.g., net 30 days), accepted payment methods, and crucially, late payment penalties. As the government has highlighted the importance of cash flow for businesses to thrive, freelancers should not shy away from implementing their own measures to ensure timely payment.
Get accounts payable contacts BEFORE you start working: Mention to the person engaging you as a freelancer that you need to accounts payable contact information before you start working. Double-check that all necessary information, such as purchase order numbers if required, is included. Send invoices as soon as work is completed or upon agreed milestones.
Create a separate email account specifically for your accounts department: This not only highlights to the client you have someone handling your accounts (even if it is you or a virtual assistant), but it will be easier to track and organise your invoicing this way. You may even consider professional invoicing software to ensure clarity and track invoice status. Once HMRC requires you to submit accounts through the Making Tax Digital initiative you are going to want proof that you have not been paid.
Follow up diligently and automatically: Don’t be afraid to chase overdue invoices. Create an email template that can be sent out, saving you time. These can be polite reminders highlighting your payment terms and late fees. If you do not receive a response in two days, be prepared to call and escalate if necessary. Keep a clear record of all communication including phone calls.
Know your rights: Familiarise yourself with legislation like the Late Payment of Commercial Debts (Interest) Act 1998. Understand your options for dispute resolution, including the Small Claims Court.
Network and share experiences on the Freelance Informer LinkedIn page: Talk to other freelancers about their payment experiences. Sharing information and strategies can be invaluable. It can help you avoid late payers.
Freelancing requires us to be diligent business owners
As Prime Minister Keir Starmer stated in September 2024 late payments are bad for the economy:
We’re determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this. We know how important it is for business owners to have the peace of mind and certainty around their cash flow to keep their businesses alive.
There are companies who respect their freelancers and pay them on time. They do the right thing and that often equates to freelancer loyalty and excellent output. Always make an effort to thank these star clients for their prompt payment. However…
Call me cynical, but companies that are new to engaging freelancers may not play by the rules because they aren’t even aware of them. That is up to us, the freelancers, to educate them. By setting clear expectations, demanding deposits and asserting our right to timely payment, we can collectively work towards a robust freelance economy. One that will ultimately give the UK economy the growth it so desperately needs.
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