The Fair Payment Code, formerly the Prompt Payment Code (PPC), is a UK government-backed initiative that sets out standards for businesses to pay their suppliers on time and fairly (within 30 to 60 days). Introduced in 2008, it was created to improve the UK’s payment culture and help smaller suppliers avoid debilitating payment delays.
In January 2025, the Prompt Payment Code was rebranded as the Fair Payment Code (FPC) by the Office of the Small Business Commissioner (OSBC) – an independent public body tasked with tackling late payments.
The Code now operates a voluntary awards scheme based on payment performance – tiered into Gold, Silver, and Bronze – rewarding firms that pay invoices promptly under clear, fixed terms.
Key takeaways
- The Fair Payment Code ensures timely payments to suppliers, helping SMEs and promoting fair business practices.
- Any UK business can join for free to boost their credibility and supplier trust, and avoid late-payment costs.
- It’s not legally binding, but signatories face oversight and awards, signalling reliability and good corporate responsibility.
Who created the Fair Payment Code and why?
The UK government launched the Fair Payment Code in response to calls from businesses to fix slow payment problems. Its goal has always been to protect small suppliers from late or unpredictable payments.
What’s the purpose of the Fair Payment Code?
The Fair Payment Code exists to tackle late payments and incentivise fair treatment of smaller suppliers. Its core purpose is to improve cash flow for businesses (especially SMEs) by promoting reliable, timely payments. By pledging to pay within agreed terms, signatory firms help prevent cash-flow crises caused by late payments.
How the Fair Payment Code addresses late payments
Late payments can severely weaken small companies. Research from the Department for Business & Trade shows UK SMEs typically lose about £22,000 per year chasing overdue invoices. The Code addresses this by asking signatories to adhere to firm deadlines, for example, paying 95% of invoices within 30 or 60 days. The rules also encourage firms to allow suppliers to charge interest on overdue bills (a legal right under the UK’s Late Payment of Commercial Debts Regulations 2013) and to have clear dispute-resolution processes.
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It is important to remember that, as late payments are governed separately by the Late Payment of Commercial Debts regime, signatories are still subject to this law whether or not they sign the FPC.
Real-world example
A small agency providing expert witnesses to legal firms struggled for years as clients routinely delayed payments. The agency was required to pay its contracted experts promptly, but received slow payments from law firms that falsely cited court case timelines as a reason for delay – even after the work had been completed. As a result, the agency relied on expensive overdrafts, which strained cash flow, reduced growth potential, and created constant financial pressure.
Had those legal firms been signatories to the Fair Payment Code, they would have been expected to honour agreed payment terms, avoiding unnecessary hardship for the SME. Unable to push too hard without risking the loss of key clients, the agency spent years building up reserves to break out of the cycle. The damage was avoidable.
Encouraging fair treatment by large businesses
Another goal is to hold large firms accountable for how they treat smaller suppliers. By signing the Code, big buyers publicly commit to fair payment practices and to monitoring their own performance. For example, many large corporations are now required to report their payment practices under law (the Reporting on Payment Practices and Performance Regulations).
What are the key commitments in the Fair Payment Code?
When a company signs up to the Fair Payment Code, it agrees to certain core commitments. These revolve around timely payment and transparency with suppliers.
For instance, a small IT service company that relies on contracting could use its Silver Fair Payment Code award to reassure new clients that payments are always made on time, therefore winning contracts from public sector bodies or large developers.
The main promises are:
1. Pay suppliers on time (within agreed terms)
Signatories pledge to pay at least 95% of invoices within agreed terms. For the Silver Award, this means 95% of invoices are paid within 60 days, and 95% of invoices from small suppliers are paid within 30 days. Gold Award holders must meet the 95% target across the board within 30 days. Ultimately, the key is to honour the payment terms you commit to.
| Award level | Overall payment commitment | Standard supplier payment terms | Small business payment terms | Key requirement |
|---|---|---|---|---|
| Bronze | At least 95% of invoices paid on time | 95% paid within 60 days | Not specified | Honour the agreed contractual payment terms |
| Silver | At least 95% of invoices paid on time | 95% paid within 60 days | 95% paid within 30 days for small businesses (fewer than 50 employees) | Meet both general and small business payment commitments |
| Gold | At least 95% of invoices paid on time | 95% paid within 30 days | 95% paid within 30 days | Strict adherence to the promised payment schedule |
2. Don’t change terms unfairly
Firms must not retrospectively alter payment terms or delay payments on unfair grounds. In other words, if you agree to “30 days from invoice” at the outset, you cannot later force suppliers to wait 60 or 90 days.
3. Give suppliers clear guidance
Businesses must provide suppliers with transparent information on payment procedures. This includes publishing clear guidance on when and how invoices will be paid, establishing a system for handling complaints or disputes, and promptly informing suppliers if a payment will be late. The idea is that suppliers should never be left guessing about payment dates or overlooked by finance departments.
4. Encourage good practice in the supply chain
Signatories should promote the Code’s principles among their own suppliers. For example, a company is expected to ask its larger clients or lead suppliers to adopt prompt-payment commitments too. This “ethical supply chain” approach means good payers lead by example and help create a culture of prompt payment throughout the wider business network.
Who can sign the Fair Payment Code?
Businesses that are eligible for the Fair Payment Code are laid out in the guidance as follows:
Eligibility and requirements
The Fair Payment Code is open to almost any UK organisation. Any company – large, medium or small – with a registered UK address can apply for an FPC award. Charities, universities, co-operatives and trade bodies are also eligible if they meet the payment criteria. Local authorities, NHS trusts and government departments, however, are explicitly not allowed to join. Importantly, there is no fee to join the Code, and no ongoing membership cost. Applicants must simply meet payment thresholds (e.g. 95% invoices paid on time) and commit to fair-payment principles.
Large businesses vs small businesses
In practice, it’s often large businesses that seek signatory status, since they have the power to improve payment practices for smaller suppliers. Over 3,000 companies (including FTSE firms, retailers, construction companies and public authorities) have signed the Code over the years.
Why do some suppliers seek signatory status?
Signatories use the Code’s award status to reassure suppliers, build trust and show they are reliable payers.
Why join the Fair Payment Code?
For a small business, the Fair Payment Code offers several advantages, especially regarding cash flow and client relations. Benefits include:
1. Enhanced reputation and credibility
Suppliers and customers prefer to work with firms that pay on time. Pledging prompt payment under the Code enhances your reputation, making you a more attractive partner.
2. Stronger supplier relationships
Reliable payment habits help build trust. By paying invoices predictably, you give suppliers certainty, therefore strengthening partnerships and loyalty.
3. Better terms from your suppliers
In some cases, being known as a prompt payer can help you negotiate discounts or better terms with suppliers.
4. Avoidance of late-payment costs
Adhering to agreed terms means you avoid legal interest or compensation charges for late payments. This can save your business money and hassle.
5. Positive corporate responsibility
Signing the Code demonstrates good CSR. It shows you’re contributing positively to the economy by helping small businesses survive.
How to check if a company is a Fair Payment Code signatory
There are clear ways to verify if a company adheres to the Fair Payment Code:
Searching the database
The UK no longer maintains a single public “Prompt Payment Code directory” (the old code was run by Business in the Community). Instead, the Fair Payment Code has an online awardees directory on the Small Business Commissioner’s site. You can search by company or sector to view current award holders. The directory lists over 400 updated entries by tier. This is the official way to verify FPC status.
What to look out for when beginning a supplier relationship
When vetting a new supplier or customer, it’s wise to check their payment credentials. Here are some tips:
- Check the FPC directory – look up the company on the OSBC awardees site. If they appear with a current award, that indicates they commit to fair payment.
- Search payment practice reports – large companies in the UK must publish biannual payment practice reports. The government’s ‘Check payment practices‘ service lets you find those reports and see if the business has signed any payment code.
- Ask directly about terms – simply ask the company what their standard payment terms are. Reliable firms should have no problem explaining this. Also, ask if they’ve committed to any fair-payment schemes. A supplier’s willingness to discuss payment practices often speaks volumes.
- Use trade references – if possible, talk to other suppliers or trade bodies in the sector. They may have insight into whether the company usually pays promptly or causes trouble.
Is the Fair Payment Code legally binding?
Whilst the Code has clear eligibility requirements, here’s where they stand legally:
The Code is a voluntary scheme
The Fair Payment Code is not a law or regulation, but rather a voluntary industry scheme. Any business may choose to sign up, but no one is legally compelled to do so. The code carries no legal penalties for non-compliance. Instead, compliance is managed by the Small Business Commissioner’s team and a voluntary Compliance Board.
Enforcement and accountability
Enforcement of the Code has historically been light-touch, but it is getting tougher under the FPC. Under the old PPC, non-compliant signatories could be publicly named or suspended by the Code Compliance Board.
With the new Fair Payment Code, the Small Business Commissioner gains more power: applicants must reapply every two years, allowing the OSBC to review evidence and withdraw awards if a company falls short. Non-compliance may lead to fines, suspension, loss of contracts, or reputational harm. Consistent offenders can be suspended or expelled from the Code, which, in turn, harms their credibility.
Only signatories are subject to the Code enforcement rules. If a company has never signed, the Code itself offers it no direct protection (they could still pursue interest under the Late Payment Act, or use the Small Business Commissioner’s dispute service). But for signatories, the Code adds an extra layer of accountability on top of any existing legal rights.
Limitations to be aware of
Even with the FPC reforms, there are limits. The Code cannot force a business to pay if it simply lacks the cash – it mainly creates incentives and penalties on paper. For example, a supplier can still end up waiting if a customer violates the terms but remains solvent.
As a soft-law scheme, it should complement – not replace – contracts, credit checks, and insurance.
Is the Fair Payment Code right for your business?
Here are the costs and benefits of the scheme:
Pros and cons for small firms
For small businesses that pay suppliers or subcontractors, joining the Code offers clear advantages.
Pros
It’s free, improves credibility, and aligns your business with government and industry expectations. Being a signatory can open doors – demonstrating you meet large buyer standards and reinforcing your commitment to fair payment. It also encourages internal discipline and helps improve cash-flow planning.
Cons
There are few downsides. The main risk is failing to meet the 95% payment target, which could damage your credibility. However, most small firms that consistently pay within 30–60 days can meet Bronze or Silver requirements without difficulty.
| Pros | Cons |
|---|---|
| Enhances trust and reputation | Must maintain consistent payment performance |
| Can improve supplier terms | Limited recognition outside the UK |
| No signup cost | Requires monitoring and evidence collection |
| Aligns with public contract expectations | Public reporting can expose poor performance if standards are not met |
Aligning with good supplier practice
Even if you’re not ready to apply, there are steps you can take to benefit from the Code’s spirit. Make sure your standard contracts clearly state payment due dates, and be willing to charge interest if bills are late – this aligns with the Code’s principles.
Keep transparent records of your payment performance (many companies use simple accounting reports or invoicing software to track days-to-pay). When talking to customers, let them know you aim to adhere to prompt-payment standards.
What to do next
If your business is interested in joining, here is a step-by-step guide on what you need to do.
1. Self-check your payments
The first step is a self-check. Review your recent payment history: calculate what percentage of supplier invoices you paid within 30 or 60 days over the past year. If it’s at least 95%, you likely qualify for at least a Bronze award.
2. Gather evidence
Next, gather evidence: this includes reports from your accounting system or bank statements showing payment dates, and at least two supplier references who can vouch for your payment record (the FPC requires references from businesses you pay).
3. Complete the Expression of Interest form
Then, complete the Fair Payment Code expression of interest form on the Small Business Commissioner’s website. The FPC team will send you an application form and guidance.
Once you apply, they aim to process your submission within 10 working days. If approved, you’ll receive your award (valid for two years), along with a logo and listing in the directory to demonstrate your status. If you don’t quite meet the criteria yet, you can still apply for guidance: the OSBC team can help you understand what improvements are needed to qualify for an award later.
In any case, staying informed about the Fair Payment Code is good business practice. It helps you avoid the cash-flow problems that plague many small firms and signals to clients and suppliers that you’re a financially responsible partner. By aligning with the Code’s principles, you’re effectively putting measures in place to protect your own business from the pain of late payments, whether or not you formally join the scheme.
Supporting small businesses at 1st Formations
At 1st Formations, we’ve helped over one million entrepreneurs start limited companies with confidence, and we continue to support them long after incorporation.
Becoming a signatory to the Fair Payment Code reflects well-managed finances, timely supplier payments, and a strong commitment to fair business practices. That journey often begins with setting up your company correctly and ensuring your compliance obligations are in place.
Whether you’re forming a new company, updating your registered details, or registering for VAT, our services can help position your business for future accreditations like the Fair Payment Code. For legal or financial advice beyond company setup, we recommend speaking with an accredited professional.
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