EU proposes compensation for late payment

11 November 2009

11 November 2009 | Paul Snell

Public sector buyers may soon be obliged to provide compensation to suppliers who are paid late.

According to proposals currently under consideration by MEPs, public purchasers may soon have to pay a flat rate charge of 5 per cent of the invoice from the first day it becomes overdue to suppliers, in addition to interest.

Vendors will also be able to recover administration costs at a charge of 40 euros (£36) for bills less than 1000 euros (£899), 70 euros (£63) for invoices up to ?10,000 (£8,988) and 1 per cent of the total cost of those bills above that figure.

The European Commission proposed the changes in April and in a report to the European Parliament's internal market committee last week, Barbara Weiler - the MEP tasked with examining such suggestions for the committee - welcomed the amendments.

She said the current EU late payment directive had had only a "limited impact" on tackling the problem across Europe. The public sector was found to be the worst payer in the EU, with an average settlement time of 65 days, compared with 55 in the private sector.

Associations representing businesses have welcomed the proposed changes, but called for greater clarity. But the Council of European Municipalities and Regions, which represents local and regional government, said adding compensation to interest and recovery fees was "disproportionate".

The internal market committee will finalise a report on the changes once all evidence has been received, before they are put to a vote in the European Parliament.

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