Embedded finance and payment solutions provider, Sonovate, found that 53% of all small and medium sized businesses (SMEs) currently use, or have previously used, contractors – with this figure increasing to 81% when looking at just medium sized businesses. However over a quarter (27%) of SMEs admit to taking over 90 days to pay their contract staff – three times longer than the average time for permanent employees. Surprisingly, this figure increases to 37% among medium sized businesses (50-249 employees), which are often expected to have more predictable cashflow and therefore be able to make more regular, timely payments.

The survey of 500 senior business decision makers found that around three in ten (28%) cited cashflow as one of the main reasons for slow payments (rising to 33% among mid-sized enterprises), while a further 62% said that these cashflow issues were caused by the knock-on effect of late payments from their suppliers and customers. Another 28% said that issues with payroll systems prevented them from paying contract workers on time.

Even though the businesses surveyed saw a clear need for competent contractors, four in ten (39%) recognised that failure to pay on time could see them missing out on quality talent and a quarter (24%) said they had lost contract workers because they weren’t able to pay them quickly.

With the global gig economy expected to grow to $455bn by 2023, there is a clear need to improve access to finance, and consequently cashflow, to help businesses pay and retain staff. Sonovate’s platform utilises the latest developments in finance, such as Open Banking, to allow recruitment companies, consultancies and labour market places to embed funding solutions which ensure contingent workers get paid on time, while employers benefit from longer payment terms. This means businesses of any size can benefit from access to skilled workers, regardless of their cashflow situation or payroll constraints.

Richard Prime, Co-Founder and Co-CEO at Sonovate, said: “Despite the last few years accelerating the number of workers going freelance or contracting, they are consistently being paid late which is not sustainable for many people – particularly at the moment.

“We know that contract workers are the future of the UK’s workforce, but with the cost-of-living crisis front of mind, 90 days is just absurdly long to wait for payment. Against the backdrop of this crisis, it is paramount that businesses have access to solutions that support them to offer fairer and swifter payment across the workforce supply chain.”

The Sonovate platform delivers flexible funding and a bespoke technology platform to streamline and automate the tasks related to funding and managing contract worker placements and freelancer projects. It helps recruiters, consultancies and labour market places to free up cash and resources, enabling them to focus on growing their business in the UK and internationally.