This month we are focussing on accounting and payment clauses. These come at the end of the contract and are often overlooked as dull and legalistic but they can make a huge difference to your cash flow and are essential if you want to ensure you are properly paid. Make sure you read carefully and don’t let your eyes glaze over when they come up. As always, send all agreements to us for checking before you sign anything.
“…if a publisher has made a mistake in your accounts then they should be the ones to pay.”
The ‘A’ in our CREATOR campaign stands for fair, understandable and proper accounting terms. Innovators need to know not only that their work is protected by intellectual property rights, but also that they will receive a fair reward if the work is ultimately successful. For that reason, we have been lobbying for accounting provisions to be mandatory.
Three obligations to transparency and fairness
Together with the European Authors’ Group we support the provisions in relation to transparency and fairness (the so called ‘transparency triangle’) announced in the Draft Directive on Copyright in the Digital Single Market, Articles 14 to 16, and urge that they be brought into both EU and domestic legislation at the earliest opportunity. The triangle consists of an obligation on all publishers to provide:
- Regular accounting, including details of all payments received and total sales of a work both from the publisher and any from sub-licensees, even if the work was done for a lump sum payment.
- A contract adjustment mechanism (or ‘bestseller clause’) allowing you to claim additional remuneration reflecting the commercial success of your works when the agreed remuneration is disproportionately low compared to the revenues derived from the exploitation of the works – even if copyright was assigned.
- A dispute resolution mechanism.
These are the points we would want to see in your contract:
Six rules for paying authors on time
“The timing of payments can make a huge difference”
- A provision for you to be sent (detailed and informative) royalty statements twice yearly (or at least annually - twice is usual).
- Monies due should be paid within three months of the date to which accounts are made up.
- Any threshold below which monies will not be paid, but will be held over, should be no more than £30-£50. (The threshold might be slightly higher if payments are going to a foreign country.)
- Once the advance has been earned, money from sub-licences (over a certain sum, say £100) should be paid to you within, say, 28 days of receipt.
- If there is a reserve against returns (the publisher holding back royalties in anticipation of unsold copies of the work being returned by booksellers), it should be limited, for example to not more than 25% of the royalties due at that accounting date, and there should be no reserve against sales of ebooks or POD copies. The publishers should be entitled to withhold any reserve at the first accounting date following publication or reissue of the work, and the balance should be repaid to you not more than 12 months later.
- The publishers should be entitled to offset any unearned part of the advance, or any sum owing in respect of returns against income only from the book in question. References to any other agreement or indeed any other book dealt with under that contract should be amended to make that clear.
The timing of payments can make a huge difference - leading to you receiving money up to a year earlier if your contract is properly drafted.
Avoiding and correcting errors
There should be a clause giving you the right, on written request, to examine the publisher’s books of account. This should be undertaken at your own cost unless errors exceeding, say, £50 or 5% are found, in which case the costs should be paid by the publishers. We have noticed that some publishers are trying to increase these thresholds. To do so is not fair; if a publisher has made a mistake in your accounts then they should be the ones to pay. However, audits are expensive and time-consuming so, for everyone’s sake, if you have reasonable grounds for suspecting errors then we would expect a publisher to conduct a thorough review of its accounts in-house on request, so as to avoid you having to invoke such a provision.
- If you are registered for VAT, it is very important that you give the publishers your VAT registration number.
- If you have assigned your copyrights to a limited company, it is very important that you make that clear to the publisher (and the contract would need to discriminate between the company as rights holder and you as author).
- If you and the publisher pay tax in different countries, you will need to check with your local tax office about double-taxation formalities.