What to do when your client doesn’t pay

What to do when your client doesn’t pay

As a self-employed person you have the right to be paid in accordance with the terms of the contract you entered into with your client. If the job has been or is being completed in accordance with that contract, the client does not have the right to withhold your earnings or to delay payment.

First step: telephone or email reminder

If you are in this position, as a first step, it is usually best to give the client the benefit of the doubt. Late payments are often the result of inefficiency or forgetfulness. A quick email or telephone reminder may yield the desired result and preserve the relationship for future business dealings.

However, if your email or telephone call does not yield the outstanding money or if you suspect the client is having financial difficulties, you need to take further action. It is best to do this as soon as possible. The longer you delay, the less likely you are to be paid in full.

Second step: formal letter

The next step is to write a formal letter. This does not need to be complicated. A draft template is below. You will need to amend the sections in square brackets to reflect your particular situation.

 

Dear [Name of Client],

As you know I am am contracted to [insert job title and brief role description]. I began the role on [date]. We agreed a fee of [amount] to be paid at a rate of [amount] every month / week. Additional payments were agreed for [insert details]. Pay day was agreed as [state date].

I have not received the fee to which I am contractually entitled.

[Detail any payments that have been made e.g. on 28th January 2017 I received £1,200 but was underpaid by a further £300. On 28th February 2017 I received no payment. This makes a total underpayment of £1,800.]

I have not been paid my fee for [state time period]. After the first missed payment, I [state how you attempted to resolve the situation e.g. by phoning or emailing. Include dates and names of anyone to whom you spoke].

To resolve this matter, I would like the outstanding amounts to be paid to me, in full, by [specify date].

Please reply to this letter within 14 days of [the date at the top of the letter]. In particular, if you do not agree that I am owed the outstanding sums, please reply to me in writing, setting out your reasons.

I very much hope it will not prove necessary but if you are unable to make the outstanding payments by the stipulated date I reserve the right to bring a claim for breach of contract through the county court.

Yours sincerely,

[Your name]

 

Next steps: County Court or Money Claim Online

If your letter does not yield the desired results, you will need to consider bringing a breach of contract claim in the County Court. It is important to realise that this can be costly and you may well need legal advice. (Note that claims in the Employment Tribunal are restricted to pay disputes involving employees.)

County Court claims for under £10,000 will be dealt with through the Small Claims Court. The cheapest and most efficient way of doing this is via Money Claim Online. There is a fee for using the service but fees for claiming online are cheaper than those for issuing a paper form. You can see the current rates here.

Dealing with a bankrupt client

A client who goes bankrupt puts you in a slightly different situation. You will become a creditor in a queue of other creditors. Unfortunately, HMRC and any financial institutions to which that client owes money will take precedence. Unfortunately, as a self-employed consultant or freelancer, your claim ranks lower than it would do if you were an employee. Despite this, you must ensure that the bankruptcy administrator has your contact details and an account of your claim. It is also sensible to ask the administrator to provide you with a written acknowledgment of that claim.