Last reviewed: 4 October 2026. This guide is general information, not legal advice.
TL;DR
- Without an agreed date, a business-to-business invoice is late after 30 days. Agreed terms should usually be 60 days or less for business transactions (GOV.UK).
- You can claim statutory interest at 8% above the Bank of England base rate, unless your contract sets a different rate.
- On top of interest, you can charge fixed compensation of £40, £70 or £100 per late payment, depending on the amount.
- The government's Commercial Payments Bill would make 60 days a firm maximum and statutory interest mandatory. It was still before Parliament on 4 October 2026, so it is not law yet.
- For a recruitment agency, the best defence is upstream: clear terms of business, timesheets signed off by the client, and invoices sent on time.
Why late payment hits recruitment agencies harder
A perm desk waits for one fee per placement. A contract desk carries a monthly gap: you owe your contractors, or their limited company or umbrella company, for the days they worked, and you are paid when the client settles the invoice. GOV.UK is explicit that an employment business must pay its temps for all the work they do, "even if you have not been paid by the hirer". Every week a client pays late is a week your agency finances its client.
The rules below apply to business-to-business debts across the UK. They come from the Late Payment of Commercial Debts (Interest) Act 1998 and the orders that set its interest rate, including a separate order for Scotland with the same 8% rule.
When does an invoice become late?
GOV.UK sets out the default rules:
- If you agreed a payment date, it must usually be within 60 days for business transactions, or 30 days for public authorities. A longer period than 60 days can be agreed between businesses, "but it must be fair to both businesses".
- If you did not agree a payment date, payment is late 30 days after the customer gets the invoice, or after you provided the service if that is later.
Two practical consequences for agencies:
- Put your payment terms in your terms of business, signed or accepted before the first introduction or supply, and repeat them on every invoice. Our recruitment agency terms of business template shows the clauses.
- The clock starts when the client receives the invoice. An invoice sent three weeks after month-end gives the client three extra weeks. Sending the invoice as soon as the timesheet is approved is the cheapest way to get paid faster.
Statutory interest: 8% above base rate
The interest you can charge a business that pays late is "statutory interest": 8% plus the Bank of England base rate for business-to-business transactions.
Which base rate applies
The rate order is precise. Article 4 of the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002 uses the Bank of England rate in force on:
- 30 June, for interest that starts to run between 1 July and 31 December;
- 31 December, for interest that starts to run between 1 January and 30 June.
That reference rate then applies to the debt. You do not recalculate every time the Bank changes its rate. Check the historical rate on the Bank of England website.
A worked example
The figures below are illustrative. Suppose the reference base rate is 4%, so statutory interest is 12% a year, and a client is 45 days late on a £12,000 invoice:
- annual interest: £12,000 × 12% = £1,440;
- daily interest: £1,440 ÷ 365 = £3.95;
- interest after 45 days: £1,440 × 45 ÷ 365 = £177.53;
- fixed compensation for a debt of £10,000 or more: £100.
GOV.UK suggests sending a new invoice if you decide to add interest.
When you cannot claim it
You cannot claim statutory interest if there is a different rate of interest in your contract. If your terms of business set their own late payment interest, that clause governs, so check what your template says before relying on the statutory rate.
Fixed compensation: £40, £70 or £100
On top of interest, you can charge a fixed sum for the cost of recovering a late payment. It can be charged once for each payment:
| Amount of the debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
GOV.UK adds that a supplier can also claim reasonable costs each time it tries to recover the debt.
Chasing in practice: a sequence that preserves the relationship
Statutory interest is a right, not an obligation: GOV.UK notes you can choose not to charge it. One possible sequence, which keeps interest as leverage rather than a reflex:
- Before the due date: check the invoice was received by the right person and that the purchase order or reference is on it.
- Due date + 1 day: a short, friendly reminder with the invoice attached.
- Due date + 7 days: a call to the client contact who signed the timesheet, then to accounts payable.
- Due date + 14 days: a formal letter stating the amount, the statutory interest accruing and the fixed compensation.
- Beyond that: a decision, not a reflex. Pausing the supply of new candidates, a statutory demand or a claim each have consequences for the relationship and should follow your terms of business and, where needed, legal advice.
What the reform will change, and where it stands
In March 2026 the government published its response to the consultation "Late payments: tackling poor payment practices", titled "Time to pay up". It says the government intends to:
- impose maximum payment terms of 60 days between businesses, with strictly limited exemptions, "no earlier than 2027";
- introduce a statutory time limit for disputing invoices, after which businesses that did not raise a dispute would owe compensation to their supplier;
- make it a requirement that all commercial contracts contain a right to statutory interest at 8% above base rate, removing the ability to agree an alternative remedy;
- give the Small Business Commissioner power to adjudicate payment disputes and to fine persistent late payers.
These measures are now in the Commercial Payments Bill, a government bill introduced in the House of Lords on 19 May 2026. According to Parliament's bill record, report stage took place on 15 September 2026 and third reading in the Lords is scheduled for 20 October 2026. It must then pass the House of Commons and receive Royal Assent, and many measures will need secondary legislation before they apply. Until then, the current rules above remain the law. The details, including dates and exemptions, may change during its passage.
How Marvin helps you get paid on time
Most late payments on a contract desk start before the invoice: a timesheet that nobody signed, a client contact who disputes the days, an invoice sent weeks after month-end. In Marvin:
- the contractor fills in a monthly timesheet in their People space, and the client signs it off from a secure link, without an account. Each signature is stored with a snapshot of what was signed, which is useful evidence if the client later disputes the days;
- as soon as every timesheet of the month is approved for an assignment, Cash drafts the client invoice from the approved days and the day rate, so it can go out the same day;
- Cash shows overdue invoices against their due date, alongside payments and credit notes.
The full loop is described in our guide to timesheet software for recruitment agencies, and the wider set-up in contract and temp recruitment software.
Marvin does not calculate statutory interest or compensation for you, and it does not run debt recovery. Check with us how Cash fits your currency and VAT set-up. Book a demo to see the timesheet-to-invoice loop on one of your assignments.
Frequently asked questions
When is a UK business invoice legally late?
If you agreed a payment date, it is late the day after that date. If you did not agree one, the law says payment is late 30 days after the customer gets the invoice, or after you provide the service if that is later.
How much interest can I charge on a late invoice?
Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is 8% a year above the Bank of England base rate. The base rate used is the one in force on 30 June or 31 December immediately before the interest starts to run, and it stays fixed for that debt. You cannot claim statutory interest if your contract sets a different rate.
What are the fixed late payment compensation amounts?
On top of interest, you can charge a fixed sum once per late payment: £40 for a debt up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more.
Is there a maximum payment term between businesses?
Today, an agreed payment date must usually be within 60 days for business transactions; a longer period is possible if it is fair to both businesses. The government intends to make 60 days a firm maximum, with limited exemptions, through the Commercial Payments Bill, which was still before Parliament on 4 October 2026.
Do these rules apply to what my agency owes its contractors?
The rules apply when one business pays another late. A contractor who invoices your agency through their own limited company is a business, so their invoices are covered in the same way as yours to clients. Separately, an employment business must pay its temps for all the work they do, even if the client has not paid.
