EC Proposes Rule Requiring Small Businesses Be Paid Within 30 Days

The European Commission (EC) has proposed that all small and medium-sized businesses (SMBs) must be paid within 30 days.

The new proposal for regulation on late payments in commercial transactions says that payment delays are “an unfair practice that compromises the cash flow of [SMBs] and hampers the competitiveness and resilience of supply chains,” the EC said in a Tuesday (Sept. 12) press release.

The proposed new rules will repeal the 2011 Directive on late payments and replace it with a regulation introducing a stricter maximum payment limit of 30 days, according to the press release. This move will eliminate ambiguities in the current Directive.

The EC proposal also ensures automatic payment of accrued interest and compensation fees, the release said. It also introduces new measures to protect companies against “bad payers.”

“We need to step up our support for [SMBs],” EC Vice President Vera Jourova said in the release. “We want to make things easier for them, bring more oxygen to help them survive and thrive. Today we come with rules to ensure small businesses are paid in due time, to cut paperwork and to simplify taxes.”

Thierry Breton, commissioner for internal market, added: “Our ambitious revision of the late payment rules will create a fairer business environment for [SMBs] across the entire Single Market. This will make small businesses more resilient and help them weather challenging times.”

The proposal was quickly opposed by EuroCommerce, a European organization representing the retail and wholesale sectors. The proposal removing the ability for companies to agree to payment terms beyond 30 days would “severely affect” established practices that rely on negotiating payment terms, the group said in a Tuesday press release.

“We support a culture of prompt payment in Europe, but restricting payment terms to address late payment issues is the wrong answer to a real problem,” EuroCommerce Director General Christel Delberghe said in the release. “Agreeing payment terms with suppliers is a crucial element of commercial negotiations. Taking away the chance for buyers who operate with low margins to make sales over a period of time to meet their costs risks distress rather than relief.”

Changing the late business payment rules was listed in the EC’s 2023 work program, PYMNTS reported in January. The EC said at the time in a statement: “We must remove the obstacles that still hold our small companies back as they are the backbone of Europe’s long history of industrial prowess.”