Pay-and-bill companies are a resource that recruitment agencies can use to provide funding and administrative support for temporary and contract placements.
These facilities typically handle timesheet processing, client invoicing, and funding candidate payments (via PAYE, umbrella, or limited companies). They then pay the agency’s profit, minus their charges often as soon as the timesheet is received, rather than waiting for the client to settle the invoice.
Pay-and-bill solutions work particularly well for agencies placing short-term, lower-paid workers or those entering the contractor market.
Below are key questions you should ask a pay-and-bill provider before signing up:
WILL INVOICES BE ISSUED IN YOUR AGENCY NAME OR THE PROVIDER’S?
Pay-and-bill companies generally operate using two models: the principal model and the assignment model.
Under the principal model, invoices are issued in the pay-and-bill company’s name and on their letterhead. Under the assignment model, invoices are issued in the agency’s name but include a note that payment has been assigned to the provider.
It’s important to understand which model is being used so you can clearly communicate this to your clients in advance.
WHAT HAPPENS IF A CLIENT FAILS TO PAY OR BECOMES INSOLVENT?
Many pay-and-bill providers offer bad debt protection, which can cover losses if a client becomes insolvent, provided the outstanding balance is within an approved credit limit.
However, not all policies cover scenarios where a client delays or refuses payment. You should clarify whether you would be liable to repay funds in these situations.
ARE CHARGES BASED ON THE INVOICE VALUE INCLUDING VAT?
Most providers charge a percentage of the invoice value. However, this may be calculated on either:
The gross value (including VAT), or
The net value (excluding VAT)
This distinction matters. For example, a 3% charge on the gross value equates to an effective 3.6% charge on the net revenue. Make sure you understand how fees are calculated to avoid surprises.
HOW ARE CLIENT PAYMENTS CHASED?
Since the pay-and-bill provider will manage credit control, they will be communicating directly with your clients.
It’s important to understand their approach to chasing payments. An overly aggressive or poorly managed process could damage your client relationships and impact future business.
WHAT IS THE NOTICE PERIOD TO EXIT THE FACILITY?
Most providers require a notice period to terminate the agreement. Some may also impose minimum contract terms (e.g. 12 months or more).
In certain cases, providers may withhold profits during the notice period even if clients have already paid, which can create cash flow pressure. Be clear on exit terms before committing.
MAYACHI has established relationships with a range of reputable pay-and-bill providers and supports agencies in selecting the right solution. We help ensure you fully understand what you are signing up to and advise on the most suitable funding options, whether that’s pay-and-bill, short-term lending, factoring, or invoice discounting.