Newsletter EULEO

Payment morality in translation industry

Oral interpretations and written translations industry generates around 1 billion PLN of turnover in Poland. Around 8000 entities operate in this sector actively. Among all of them, only around 80 conduct economic activity in the form of commercial partnership or company, which means that they are registered in National Court Registry (Krajowy Rejestr Sądowy). Over 90% of all companies in translation industry are sole proprietorships or civil partnerships.

Translation business  is highly atomized. Excluding the biggest 30 translation agencies  which  are responsible for 15% of turnover, it is easy to calculate that the average revenue per entity is 110 000 PLN. Applying the 30% margin, i.e. 70% of operating costs, the translator is left with the average of 4000 PLN per month. Taking into consideration that an independent translator works for  10-14 hours a day, does not have the right to a paid leave, has to wait even for couple of weeks to be paid, it is not surprising, that only the most persistent stay in this industry for more than 5 years.  Many translators and interpreters resign and choose to work in corporations that offer fair and secure money.

Translation market is organized in a two-tier way. Its “foundation” and the most numerous part consists of freelancer translators and interpreters, who provide translating services directly. Most of their commissions come from translation agencies specialized in many languages, acting as “hubs” towards clients and translators.  It is them who fight for contracts and share commission on their own criteria. It is not a mystery, that the basic principle for choosing the right translator is the price. It unfortunately  derives from the way that terms of tenders and contests are based on minimal price rule. Translators rarely have the comfort of working directly with end client. The usual path of the majority of translation  orders is client – translating agency – translator. Commissions of sworn translations are an exception, as they land with translators directly from courts, prosecutor’s offices and the police. Translators working in rare languages does not complain about lack of clients either.

What the translation agency actually is? It is a business that sells other entities’ services. Its key activities are marketing, sales, taking part in tenders looking for translators and organizing their work. Translation agency usually does not employ full-time translators but cooperates with free-lancers. You do not have to be a translator to establish a translation agency. You can sell Hebrew translations not knowing this language. Translation agency’s earning is the marge being a difference between the price for the client and the rate paid to translator. The bigger the difference, the bigger agency’s earning.

Polish translation agencies are usually small, with weak financial background. Only one of them is quoted on Warsaw Stock Exchange. Often, the working capital consists of internal funds of owners or bank credit. Regarding an unfavorable balance structure, agencies have limited credit rating and they suffer from permanent lack of monies. A lot of them does not have adequate financial resources yet they take part in big tenders and projects that require months of financing. The most lucrative contracts come from public sector and big businesses. The period between  order realization and the client making a payment within sizable contracts is usually between 30 to 60 days.

Being deprived of a proper financial background, agencies take up even the largest commissions. In practice, they delegate performing this service to translators, paying them for their work only once they receive payment from the client. It is very common that costs of financing some of the agencies are born by translators themselves, as subcontractors.

The situation seems to be even worse than in the construction industry, because in the latter, contractors are under special protection. Awareness needs to be raised, that delays in payment for translator’s work can reach even 90 and 120 days.

Professional translator needs to be prepared for securing 2-3-month worth of financial buffer in order to pay social insurance and taxes. The size of this pathology, i.e. low level of payment morality of many translation agencies, results in a popular saying in translation industry suggesting that you need to have either a rich partner or rich parents to be a professional translator.

Agencies indebt themselves with translators in an ineligible way, treating them as financial institutions. They worked out a set of rather peculiar methods and argumentation to delay or avoid payments:

  1. Conditional payment. Agency pays the translator provided that it receives a payment from the client first. Sometimes translator of one language waits until the agency receives payment for a package of languages, that the translator has nothing in common with.
  2. Superficial procedures and schemes of payments. Agency pays in 30 days counted from the month succeeding the month in which the client accepted the translation.
  3. Payment according to the pyramid scheme. Agency pays for minor invoices and keeps delaying payment for the biggest ones. 80% of the invoices are paid, satisfying only 20% of the total amount of liabilities.
  4. Multistage acceptance mechanisms. Payment is ready to be actioned, but it awaits owner’s acceptance, who is absent and it is not known when he will be available.
  5. Avoiding contact with translator. For the purpose of ordering translations, agencies delegate people who have no competencies in the matter of settling invoices with translators. People responsible for payments are unavailable to translators.
  6. Referring to lack of an invoice. Along with the translation, the translator sends an invoice, which often “get lost”. Sending this invoice one more time results in the agency counting the payment date anew.
  7. Forcing the translator to delay invoice issuance. Agency accepts 14-day payment time, under one condition, that the translator will issue an invoice in 30-60 days starting from the date of providing service.

Some of the arguments used by agencies are downright funny: “Lady who makes transfers comes to the office only on Fridays”, “We do not accept an invoice sent by e-mail, please send it by traditional mail”.

Tadeusz Broś, from EULEO Debt Collection confirms that translators are gradually losing their patience and refer recovering their funds to professional debt collectors. Refusing to accept commissions from nonsolid agencies or the ones that does not have sufficient financial resources is more and more common, as well as publishing agencies’ debts on debt exchange platforms, e.g., charging and claiming interests and, so called, compensation (40 EUR) on the basis of Payment in Sales Agreement Act.

It is not uncommon that translators join forces on internet forums. They are looking for a different way, trying to cooperate directly with end users, avoiding nonsolid middlemen. They invest in internet marketing and gain potential clients actively.

According to translators’ opinion, translation agencies working as they are nowadays are doomed to marginalization. Favoring pathological, non-collaborative methods of cooperation with translators results in loss of the trust towards agencies, not only by subcontractors. It is more and more frequent that  final clients refuse to support a nonsolid business. They are aware, that the decision about choosing a translator is increasingly based not on his competencies, but on the lowest rate and desperation connected to lack of commissions.

It would be unfair to say that depicted situation applies to all of the agencies. Nevertheless, one can risk a thesis, backed by translators’ opinions, that 40% of translation agencies use their position on the market and lives “at translators’ expense”. Low entry threshold to agency business results in  the agencies being managed by incompetent or even dishonest people.

Consolidation of agency business, following the rules of business ethics, excluding nonsolid companies, end users’ rising awareness – this is the cure-all for low payment morality.

As per Tadeusz Broś’s opinion, translation industry has huge growth potential of payment morality, because it cannot get any worse.