The self-employed are the smallest of small businesses. Too often, IPSE hears from members about the difficulties they have in settling a dispute with a client or agency over late payment, intellectual property or a contract, to name a few.
The most common problem faced by the self-employed is late-payment. New research from our latest policy survey shows almost three quarters (71%) of disputes between self-employed workers and their clients were concerned with late payment, and that only slightly more than a third (37.9%) who were in dispute with their agency were satisfied with the way it was resolved.
The self-employed often have little power to resolve issues with larger clients as the balance of power means the larger party will be favoured. This can cause serious damage to a small firm’s cash flow
In such circumstances, small businesses and the self-employed often cannot afford to resort to court action, either because of the expense or the reputational damage it would cause. And although commercial negotiation is possible, it can be expensive, and few (only 5.5% of our members) are aware of alternative dispute resolution.
The self-employed often have little power to resolve issues with larger clients as the balance of power means the larger party will be favoured. This can cause serious damage to a small firm’s cash flow, especially those who depend on their payment on time to fund their work.
IPSE proposed a solution to this, and the Government has taken it up with plans to introduce a UK Small Business Commissioner. The Commissioner will give small businesses an independent body to help settle disagreements. If set up in the right way it will provide a conciliation, arbitration, advice and dispute resolution service.
The Government have been consulting with IPSE on the scope and powers of the Commissioner, with the discussions taking a big step forward at a recent roundtable held at our offices at the end of September. IPSE was joined by a team of experts including Mark Brennan, the Australian Small Business Commissioner, representatives from the Department for Business, Innovation and Skills and the Government’s ambassador for the self-employed, David Morris MP. The meeting analysed how the service would tackle the worst offenders of late payment and the lessons the UK can learn from the Australian Small Business Commissioner.
A similar model on the other side of the World
In Australia, businesses can turn to an independent body – The Australian Small Business Commissioner - to help settle disputes, including late payments, whether the dispute is with Government or with another business. This avoids the need for lengthy court action, preserves business relationships, and lets both parties ‘get back to business’.
A commissioner gives small businesses an independent body to help settle disagreements
The role of the Australian Small Business Commissioner is simple: it provides information and assistance to small businesses and the self-employed, including referral to dispute resolution services, represents interests and concerns to the Australian Government and works with industry and government to promote a consistent and coordinated approach to small business matters.
Mark Brennan, the Australian Small Business Commissioner, had previously served for seven years as the inaugural Victorian Small Business Commissioner (VSBC), which was the first such position in any jurisdiction in Australia. The VSBC model implemented by Mr Brennan is widely regarded as best practice, so IPSE have been regularly consulting with him when setting out the roles and responsibilities a UK Commissioner could have.
It needs to be able to enforce its decisions effectively, and make sure the routes to successful mediation are efficient, quick and at a low cost
Australian Small Business Commissioner, Mark Brennan:
“It’s heartening and pleasing that the UK has looked at Australia’s experience when establishing a Small Business Commissioner for the business community. I commend IPSE for the pivotal role they have played in progressing the agenda for the establishment of a Commissioner.”
For a Small Business Commissioner to work, it’s essential it has the right roles and responsibilities, covering the whole of the UK. It needs to have the gravitas and credibility of the Australian Commissioner, where the Chief Executive of any business, no matter the size, will take the call of Mr Brennan and listen to what he has to say.
Chris Wilford, from the Chartered Institute of Arbitrators (CIArb) Head of Policy and Public Affairs, was also at the round table, stating:
“The Alternative Dispute Resolution (ADR) sector remains confusing and difficult to navigate for small UK businesses, with many simply unaware of the alternatives to the court room. Bringing in a Small Business Commissioner can overcome over-complicated, lengthy and often expensive court process for small businesses quickly and cost-effectively.
“This conciliation service should expand on the existing methods of ADR to confront poor payment practices and give small businesses the option of trying to settle their disputes outside of court.
“It needs to be able to enforce its decisions effectively, and make sure the routes to successful mediation are efficient, quick and at a low cost. Its long term goal should be to have the ‘teeth’ to be taken seriously.”
IPSE’s recommendations for the commissioner
The Commissioner should provide advice.
Often businesses and sole traders are unaware of the rights they have to pursue issues such as late payment. They may not know where they can turn for support. A Commissioner would be both a provider of advice and a ‘signposting’ service to other agencies that may be able to help.
The Commissioner should stop issues from escalating, preserving relationships.
A key function of the Commissioner would be to preserve business relationships and prevent escalation to an overburdened judicial system. By facilitating conciliation and mediation services, much like the Advisory, Conciliation and Arbitration Service (ACAS) does in employment relationships, issues would stop going to court as action that both sides agree on can occur. A potential benefit being late payment cases in the small claims court far less often.
The Commissioner should ensure the balance of power is fair.
A Commissioner should be able to independently criticise a business or industry which is guilty of bad practice by ‘naming and shaming’ them through their Annual Report. This adds extra clout in a dispute by reminding them of their legal obligations and ways of fulfilling them. In cases where the Commissioner is unable to come up with a solution and a dispute does go to the courts, the fact that a complainant sought to resolve the situation first through the Commissioner would be seen as evidence of positive intentions.
The Commissioner should act as an honest broker.
A Commissioner should be able to suggest ways forward which benefit both parties in a dispute, as it has nothing to gain and is acting independently. For this to happen, whoever the Government appoints as Commissioner must have credibility and the power to be taken seriously.
The Commissioner should have the power to recommend legislation.
For where there is evidence of persistent industry-wide problems, the body should recommend on legislation to address any such issues. The threat of regulation is likely to prove effective in disincentivising unfair treatment.
It is essential that the Commissioner plays a central role in driving a culture change amongst businesses that pay late and treat small businesses and the self-employed poorly. For this to happen IPSE believe it is crucial for the Government to provide a Commissioner that resembles the Australian service, and be easy to use, cost-effective and powerful.
We’re positive that this new service can really make a difference by being the first point of call for all business disputes, and go a long way to improving the UK’s payment culture.