Payment Within 30 Days (SME Support)

Late payment is one of the most damaging structural disadvantages facing SMEs in public sector supply chains. A small business that delivers services in January but receives payment in April is effectively providing interest-free credit to a public authority or prime contractor. At scale, across thousands of transactions, late payment from the public sector contributes directly to SME insolvencies. The 30-day payment obligation in European procurement law is the primary legal mechanism designed to prevent this.

What is the payment within 30 days obligation?

Directive 2011/7/EU on combating late payment in commercial transactions (the Late Payment Directive) establishes the core obligation: in transactions where the debtor is a public authority, payment must be made within 30 calendar days of receipt of an invoice or goods and services, whichever is later. Interest accrues automatically on late payments at the European Central Bank reference rate plus at least 8 percentage points, and the creditor is entitled to claim a fixed recovery cost of at least EUR 40 per late payment without any reminder requirement.

For transactions between businesses (including prime contractors paying subcontractors), the same 30-day default applies, extendable by contract to a maximum of 60 days unless specifically agreed and not grossly unfair to the creditor. Agreements imposing payment terms beyond 60 days are presumed grossly unfair and can be challenged or declared void.

In the UK context, the Late Payment of Commercial Debts (Interest) Act 1998 (as amended) provides equivalent protection with an 8 percentage point premium over the Bank of England base rate. The UK Procurement Act 2023 strengthens supply chain payment obligations by requiring prime contractors to pass through payments to their subcontractors within 30 days of the prime being paid, and allowing contracting authorities to withhold payments from prime contractors who persistently pay their supply chains late.

The construction sector across Europe has sector-specific payment norms: in the UK, the Housing Grants, Construction and Regeneration Act 1996 and the Construction Act impose 30-day default payment periods and ban pay-when-paid clauses in most circumstances.

Supply chain finance (reverse factoring) is a complement to payment terms: where the 30-day obligation provides the legal baseline, supply chain finance instruments allow SMEs to access the value of approved invoices even earlier, at a financing cost reflecting the buyer's (not the SME's) credit rating.

Why it matters for bidders

For an SME, the 30-day rule is a floor, not a target. In practice, many public authorities and large prime contractors still pay late. Knowing your legal rights means you can assert them: charging statutory interest, claiming the fixed recovery cost, and where persistent late payment is the issue, raising a formal complaint or including payment performance as a risk factor in future contract negotiations.

When tendering, the payment terms offered by the contracting authority should be read carefully. Some authorities offer early payment schemes or supply chain finance programmes that allow faster access to cash than the standard 30-day term.

Example

A small electrical contractor in Romania completes work on a public building upgrade and submits an invoice to the prime contractor (a large construction company) on 1 March. The prime contractor has received payment from the contracting authority but does not pay the subcontractor until 18 April, 48 days after the invoice. Under the Late Payment Directive as transposed in Romania, the small contractor is entitled to charge statutory interest on the overdue amount from day 31, plus a fixed recovery cost. The small contractor raises a formal invoice for late payment interest: EUR 320 in interest plus a EUR 40 fixed recovery cost. The prime contractor pays within five days to avoid escalation.

Frequently Asked Questions

What is the verification period for invoices under the Late Payment Directive?

The directive allows a verification or acceptance period of up to 30 days before the payment clock starts, but only if this is explicitly agreed in the contract and not grossly unfair to the creditor. In most cases for straightforward invoices, no separate verification period is warranted. The 30-day payment period runs from receipt of the invoice or completion of the goods or services, whichever is later.

Can a public authority agree to pay in 60 or 90 days?

Public authorities are subject to a strict 30-day maximum under the Late Payment Directive for transactions where they are the debtor. Unlike business-to-business transactions, there is no contractual override available: a public authority cannot validly agree a 60-day or 90-day payment term. Any such term is void as a matter of law.

What if the contracting authority disputes the invoice?

Where a contracting authority raises a genuine dispute about the invoice (incorrect amount, disputed delivery), the clock may be paused pending resolution of the dispute. However, the authority cannot use blanket invoice processing delays or internal administrative procedures as a justification for late payment. The obligation is on the authority to have systems in place that can process and pay valid invoices within the 30-day period.