Policy option 1: to prevent late payment from occurring
Policy measures under this option aim at preventing late payment by ensuring fair payment terms. Maximum payment terms are set, also for the verification procedure to check compliance with the contract requirements. Provisions providing SMEs with training on credit management and financial literacy are also included.
Policy option 2: to facilitate timely payments
Policy measures under this option aim at addressing late payments by strengthening enforcement of the rules and ensuring that payment terms are respected. The current Directive’s deterrents, namely, the entitlement for late payment interests and the flat fee compensation are made more effective by making interest on late payments mandatory and increasing flat fee compensation. Enforcement is a key driver for the problem of late payments. Therefore, the options that have been assessed differ according to the powers entrusted to a national enforcement body designated by EU Member States. The option also includes synergies with public procurement to protect subcontractors in public work contracts.
Policy option 3: to strengthen redress mechanisms, ensure fair payment conditions and empower companies
Policy measures under this option promote fairness and the availability of effective redress mechanisms if payment conditions are not met. EU Member States will need to establish mediation tools that are easily accessible to SMEs and address unfair contractual terms and practices through their national law.
The preferred option. Each option has potential benefits but also poses some risks when implemented alone. The impact assessment concluded that the preferred way forward consists of a package of the most effective and efficient measures under the three policy options. The impact assessment also concluded that a regulation is the preferred form of the legal act.
Preferred policy package: 1a+2a+3b
- Cap payment times at 30 days in B2B transactions.
- Verification or acceptance procedure capped at 30 days (no derogation).
- EU Member States facilitate availability of credit management and financial literacy training, including digital payment tools for SMEs.
- Late payment interest is automatic (‘entitlement’ concept eliminated), the ending day for accrual of interest is clarified.
- Flat fee compensation owed for each transaction paid late and increased to EUR 50 to reflect inflation.
- EU Member States to designate bodies responsible for enforcing the law, carrying out investigations on their own initiative or through complaints, empowered to issue administrative sanctions and publish the name of offenders. Use of digital tools for more effective enforcement.
- In public works contracts, contracting authorities and contracting entities must check that payment to the main contractor has been passed onto the direct subcontractors.
- EU Member States to set up a national system of mediation to solve payment disputes in commercial transactions.
- EU Member States to address the question of unfair contractual terms and practices through their national law.
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