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Pay when Paid Contracts

Recruitment International Audit and Compliance Pay When Paid Contracts Lynn Mildner – Towergate Credit 5 th March 2013. Pay when Paid Contracts. Introduction Acronyms - Terminology What are “pay when paid contracts”? Why are they an issue? Steps forward? Pitfalls. The Acronyms.

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Pay when Paid Contracts

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  1. Recruitment International Audit and Compliance Pay When Paid ContractsLynn Mildner – Towergate Credit5th March 2013

  2. Pay when Paid Contracts Introduction Acronyms - Terminology • What are “pay when paid contracts”? • Why are they an issue? • Steps forward? • Pitfalls

  3. The Acronyms GPS – Government Procurement Service RPO’s – Recruitment Process Outsourcing companies MSPs – Managed Service Providers APSCo –Association of Professional Staffing Companies ABFA – Asset Based Finance Association ABL – Asset backed lender

  4. What Are Pay When Paid Contracts? Used by RPO’s , MSPs or “master vendors” Agency supplying staff will not be paid until a third party has paid them • Often “in full” • No end stop date • No contractual relationship with third party • No protection against third party insolvency

  5. Why does this matter? • Staff are paid with no income from contract • Often no impetus to speed up payment from end client • Funding - Invoice discounters/Factors • Credit Insurers contractual principal/risk CASHFLOW

  6. The Construction Industry Latham report and 1996 Housing Grants and Construction and Regeneration Act • Assumed to have outlawed pay when paid, • Gives legalised framework - applied when third party insolvent • No model for reform of recruitment industry • Not reliant on cash flow funding

  7. Progress– Apsco Code - Summer 2012 • Pay, or allow contact with third party by given date • Most ROPs and MSPs sign up to new code • GPS committed to eradicating pay when paid contracts between agencies • ABLs cautiously continue funding agencies BUT............ Beware the re-factoring date.......

  8. Pitfalls Refactoring - c.123 days outstanding - deducted from new funding Credit Insurance – principal/overdue reporting/claim failure Double funding – the ABL dilemma.

  9. Future Trends? Self Bill – the back door to pay when paid? • Bill when third party pays • Credit Insurance – Self Bill endorsements specify “bill by” • Contracts - Dates must be reflect credit insurance/ funder agreement • Invoicing period • Credit period

  10. Further Information Lynn Mildner – 07769880445 Business Manager Towergate Insurance - Credit 77 Leadenhall Street, London EC3A 3DE

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