There is a new Fair Payment Code for UK businesses. Small business commissioner Liz Barclay explains why it is particularly relevant to the construction sector.
The new Fair Payment Code (FPC) is administered by the Office of the Small Business Commissioner (OSBC) on behalf of the Department for Business and Trade. It replaced the previous Prompt Payment Code (PPC) at the end of 2024.
Many construction firms were signatories to the PPC, but most had signed up when bidding for contracts and forgotten about the commitment they had made. Many were not engaging with the PPC, the person who had championed joining the PPC had moved on, there was no ownership, and firms were no longer complying.
The time was right for a complete rethink. As a result, the PPC no longer exists, and the criteria for an award from the FPC are very different. If you were a signatory to the PPC, to get an award from the FPC, you need to apply again and prove you fulfil all the FPC criteria.
Tiered awards system
The FPC has a tiered system of awards aimed at recognising best practice and driving improvements in payment performance. The three award tiers businesses can apply for are:
- Gold – Pay at least 95% of all invoices within 30 days.
- Silver – Pay at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses (with fewer than 50 employees) within 30 days.
- Bronze – Pay at least 95% of all invoices within 60 days.
There’s also a new application process. Here’s how it works:
- Send us an Expression on Interest and we’ll send you all the details, support you with the application and the evidence you need to provide, and work with you to get the tier of award you want to achieve.
- Once you have your FPC award it’s yours for two years, after which you are required reapply.
- We ask for evidence that you’re paying as you say you’re paying, from your accountant or cloud accounting software provider, for instance. We also check with your suppliers and ask to see examples of the contracts you issue.
- When you submit an Expression of Interest, you’ll see that we also want to be sure you are behaving fairly to suppliers to avoid payment disputes by being clear about the payment terms you’re agreeing with them.
Five things construction firms need to know about the FPC
- Achieving an award from the FPC requires fair written contracts, including clear payment terms accompanied by evidence that the applicant is paying in 30 or 60 days (not 30 or 60 days end-of-month or net or after approval, but 30 or 60 days after receipt of the supplier’s invoice).
- The FPC is a tool for culture change in payment practices and acts as a dispute avoidance tool. Committing to written terms, paying fairly and quickly, and sticking to that commitment, shows leadership and is a badge of honour among peers in the sector.
- The FPC aims to make suppliers confident they’re dealing with fair and ethical customers, committed to building partnership working and mutual respect.
- The commitment to fair, clear and collaborative behaviour mitigates the imbalance of power that currently leads small suppliers to fear negotiating for better, fairer payment terms.
- The FPC is aspirational and encourages continuous improvement, and the OSBC team is committed to working with applicants to improve payment practices and move up the bronze, silver and gold scale.
The Fair Payment Code highlights the importance of supplier relationships. Suppliers need certainty about when they will be paid so they can be confident about investing in better or more up-to-date equipment and machinery, upskilling or training people, and innovating and creating jobs.
Customers get better products and services when suppliers are confident in investing. Paying quicker and fairer benefits everyone in the supply chain, which becomes more resilient and sustainable as a result.
Liz Barclay is the small business commissioner for the UK.
