The Government has approved formal arrangements to reduce the payment period by central Government Departments to their business suppliers from 30 to 15 days. The commitment will have effect from 15 June 2009. However, missing invoice syndrome is unlikely to change.

Under 1997 legislation, all State bodies, local authorities and those working on State-paid contracts are obliged to pay within the calendar month.

Traditionally, public bodies have been notorious for payment with problems getting invoices approved or commonly the paperwork getting lost in the system. The issue isn't a public/private one as the taking of unauthorised credit is a long established routine in the Irish private sector and big companies, such as Dunnes Stores are well known transgressors.

Last February, The Irish Times said that it had suspended supplies to Dunnes branches following the decision of the retailer to stop honouring standard terms and conditions relating to payment for newspapers which The Irish Times applies to all newsagents. The biggest Irish-owned retailer had reverted to "the cheque is in the post" system, which enables it to stretch credit through delaying payment.

Kerry Group Plc used to have a policy of only making essential payments in December - -  the last month of its financial year.

“Reducing payment periods to 15 days for Government Departments should help ease cash flow difficulties for small business operating under current economic difficulties,” said Tánaiste Mary Coughlan. “ I hope that it will also set an example for businesses in the private sector to improve their payment record and pay each other more promptly.”

As part of the new arrangements, Departments will be required to report quarterly to the Department for Enterprise, Trade and Employment, on the manner in which they have complied with the Government commitment and they will also include information on the implementation of the measures in subsequent Annual Reports.

The arrangements will operate on an administrative basis and will not alter the contractual relationship between Departments and their suppliers or the current late payments legislation.

“Departments will now give greater priority to making timely payments,” said Coughlan “and to ensuring that their suppliers are fully aware of what actions they must take to support more speedy payments. Suppliers will need to ensure they submit a valid payment request to the appropriate Departmental source. Any issues arising with payments should be raised directly with the Department concerned.”


The Tánaiste is also assessing the impact of extending the requirement to the local authority, health and education sectors and specific proposals in relation to these sectors will be developed following the completion of the assessments.

Current Legal Position in relation late payment in commercial transactions is addressed by the European Communities (Late Payment in Commercial Transactions) Regulations 2002 (S.I. No. 388 of 2002). The 2002 Regulations transposed EU Directive 2000/35/EC on Late Payment in Commercial Transactions into Irish law. Under the 2002 Regulations, it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest (“late payment interest”) on the amount outstanding. Interest shall apply until such time as payment is made by the purchaser. The current interest rate applicable since 1 January 2009 is 9.50% per annum or 0.026% per day. This rate is set as at 1st January and 1st July each year at a rate of 7 percentage points above the European Central Bank interest rate on its most ecent main refinancing operation. In the absence of any agreed payment date between the parties, late payment interest falls due after 30 days has elapsed. Departments automatically include late payment interest where late payments are being made after the 30 day period.

Usually, a supplier would levy interest, knowing that the business relationship with the purchaser would effectively end.

There will be no change to this legal situation as a move to earlier payments by central Government Departments will be done on an administrative basis only. Any question of late payment penalty interest will only arise in the context of delayed payments beyond 30 days. No penalty interest will apply in cases where payments are made outside the 15 day administrative period but within the 30 day period.