With almost 50% of invoices in the EU not being paid on time, MEPs are in the process of drafting a payment regulation which would have a 30-day payment limit.
The proposed regulation seeks to streamline payment processes and foster a culture of timely payments, thereby eliminating ambiguities and legal gaps that have hampered the effectiveness of the current Directive on late payments.
Key highlights of the draft regulation include the introduction of a stricter maximum payment term of 30 days in both business-to-business (B2B) and government-to-business (G2B) transactions.
However, companies will retain the flexibility to negotiate payment terms of up to 60 calendar days in B2B transactions, provided it is explicitly agreed upon in the contract. Recognising the unique dynamics of the retail sector, which often necessitate longer payment periods due to factors such as low product turnover and seasonality, the regulation proposes allowing payment terms of up to 120 days in these cases.
To safeguard companies, especially SMEs, against late payments, the regulation mandates the automatic payment of accrued interest and compensation fees. Debtors failing to meet payment deadlines would owe compensation fees ranging from 50 to 150 euros per transaction, depending on the transaction value, to cover the creditor’s recovery costs.
In addition to these measures, the proposal introduces new enforcement mechanisms, redress options, and awareness-raising initiatives. It encourages the use of e-tools to expedite payments and advocates for financial literacy training for SMEs.
Under the regulation, contracting authorities, including government entities, would be required to submit publicly accessible reports on their payment practices to the national enforcement authority annually. Furthermore, a European Observatory of Late Payment would be established to monitor, collect, and share data on late payments and potential harmful practices.
“Unreliable cash flows can jeopardize SMEs and micro-enterprises, limiting growth, innovation and EU’s competitiveness. With this regulation, we are not only protecting the smaller companies, which are the backbone of our economy, but above all, we introduce predictability and fairness for all European companies. It is a major push towards fostering a better payment culture, beneficial for the entire European economy,” Rapporteur Róża Thun Und Hohenstein said.
Spain’s name-and-shame list of late-payers
Late payment has also been a long-standing problem in Spain. To tackle the problem, the Spanish government introduced a ‘name and shame’ system last summer, following strong pressure from hauliers. The background to the system is the October 2021 regulation, which allows companies in Spain that pay their hauliers late to be heavily penalised. The list above shows the names of the companies that have broken the rules and the amount of the fine they have received.
On the latest list, there are over 400 companies. Some have been fined more than €125,000. The companies come from all sectors of the economy – from department stores to food companies to car manufacturers.
At the end of 2021, a system of penalties for late payment in road transport came into force in Spain. Together with the activities of the Transport Inspectorate in this area, it has been making a decisive contribution to improving the situation with regard to payment terms for hauliers. In January this year, the average payment term in the Spanish transport industry was 66 days, while in 2021 and earlier it had been up to 90 days.
Despite the gradual reduction in this average, there is still no shortage of companies that do not pay transport operators on time. One element of the Spanish government’s strategy to motivate hauliers to pay on time is the publication of a list of companies that have been penalised in administrative proceedings for late payment.
Recently, the Ministry of Transport presented a list of more than 400 companies fined for such offences in the second quarter of 2023. The record holder – TRANS SESE SL – was fined four times for a total of more than €125,000.
The first list, published in August 2023, included well-known global players such as DHL and Kuehne + Nagel. DHL also appeared in the new edition, with a fine of more than €60,000. Another well-known operator that was fined €1.4k in Q2 2023 for being in arrears with transport payments is Rhenus Logistics.
Co-authored by Agnieszka Kulikowska-Wielgus