Labor to push for fines in plan to name and shame big business over payment terms

brendan o'connor payment terms

Shadow Minister for Employment, Industry and Small Business Brendan O'Connor. Source: AAP Image/James Ross.

Federal Labor will seek to amend the Morrison government’s plan to name and shame big businesses over payment terms, calling for fines to be imposed if suppliers still aren’t being paid on time three years after the reforms are implemented.

The so-called “fail-safe mechanism” would empower regulators to introduce financial penalties if small business payment times fail to move to 30-days or less under the compulsory reporting framework.

The Payment Times Reporting Bill 2020 is on the books for debate in the Senate this week, where the government will seek final parliamentary approval to compel companies with more than $100 million in annual turnover to disclose how quickly they pay small businesses.

The legislation has been described by the government as concrete action to address late payment times for small businesses — a longstanding and very costly problem.

However, there is scepticism among small business advocates that the program will meaningfully improve payment times, particularly in the context of the COVID-19 pandemic, which has further exacerbated cashflow concerns for those waiting up to six months on invoices.

Shadow Small Business Minister Brendan O’Connor has issued a blistering criticism of the legislation, arguing the Coalition’s proposed reform is full of holes.

“It’s a weak piece of proposed legislation in that it relies on the presumption that transparency alone will determine conduct in large businesses,” O’Connor tells SmartCompany.

“It’s Labor’s view [the legislation] will not be sufficient to change the conduct of large companies.”

Labor wants the government to beef up the reforms by introducing a fail-safe that would raise the spectre of financial penalties if, after three years reporting under the framework, big businesses still aren’t paying small business suppliers within 30 days.

The amendment is unlikely to succeed, and Labor has indicated it will still support the bill if that happens, having earlier conceded the reforms are a “step in the right direction”.

Others — including small business ombudsman Kate Carnell and Council of Small Business Organisations chief Peter Strong — maintain payment terms in excess of 30 days should be illegal, but have been remiss to throw a spanner in the works of the current reforms, lest the perfect be the enemy of the good.

“We’re not convinced the scheme will achieve meaningful change in payment times from a large number of large businesses,” Carnell told a Senate committee in July.

A Senate committee tasked with reviewing the reforms last month concluded that while stakeholders on both sides — businesses large and small — had expressed concern about the framework, it would nevertheless improve payment times.

“The Payment Times Reporting Framework will have a positive impact on the conduct of large businesses and assist in improving payment practices and reducing payment times for small business suppliers,” the committee concluded.

The committee called for a review of the payment terms framework after two years, but Labor senators, in additional comments, said self-regulation was inherently problematic.

“The Payment Times Reporting Scheme is, in reality, a transparency initiative to support self-regulation. The efficacy of self-regulatory regimes is usually poor to questionable unless backed by a genuine threat of heavier-handed regulation,” they said.

NOW READ: Will naming and shaming work? Small business sceptical as Payment Times Reporting Framework scrutinised in Senate

NOW READ: ‘An act of business bastardry’: Big business keeps squeezing small suppliers on payments in face of COVID-19


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