Freelancers wait three times longer to get paid than full time staff, as firms struggle with both cash flow and payroll issues, according to research from Sonovate.
Its report also found that 53% of all small and medium businesses currently use, or have previously used, contractors. This figure reaches 81% when looking just at medium sized businesses.
Despite this, 27% of SMEs admit to taking more than 90 days to pay contract staff, which is three times longer than the average time for permanent employees. Furthermore, the figure increases to 37% among medium sized businesses.
Of the 500 senior business decision makers to respond to the survey, 28% cited cash flow as the main reason for slow payments, with this rising to 33% among mid-sized businesses. A further 62% said these cash flow issues were caused by the knock-on effect of late payments from suppliers and customers.
Another 28% said that issues with payroll systems prevented them from paying contract workers on time.
Despite this slow processing, 39% of firms recognised that failure to pay on time could see them miss out on quality talent and 24% said they have lost contract workers because of slow payments.
Sonovate co-founder and co-CEO Richard Prime said, “Despite the last few years accelerating the number of workers going freelance or contracting, they are consistently being paid late which is not sustainable for many people – particularly at the moment.
“We know that contract workers are the future of the UK’s workforce, but with the cost-of-living crisis front of mind, 90 days is just absurdly long to wait for payment. Against the backdrop of this crisis, it is paramount that businesses have access to solutions that support them to offer fairer and swifter payment across the workforce supply chain.”
Sonovate recently closed a £165m securitisation deal with BNP Paribas and M&G Investments. The FinTech company provides on-demand workforces with embedded finance and payment solutions.
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