Contracts: Unpaid? These people could write the book on it

As artists from authors to musicians miss out on royalties, Kate Hughes and Julian Knight show what to look for in a contract
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Now is hardly the best time to be chucking away money, but that's precisely what many self-employed people – authors, inventors and musicians among them – are doing with their royalties.

People may be missing out, warns accountancy firm Fisher Forensics, because of loopholes in their contracts or, less often, because the company in question is attempting to keep hold of the cash.

Authors, for example, should expect to earn 10 per cent of a book's cover price on hardbacks, rising to 15 per cent if the book is particularly successful or the writer is a bestseller, says publisher Penguin. That amount is multiplied by the number of copies sold and is then paid by the publisher to the author.

In a similar way, inventors holding the patent for a product will get a percentage of the retail price from the manufacturer.

Common royalty problems include not being paid if a book, CD or invention is discounted by the retailer, and being denied revenue from overseas sales. In addition, self-employed people who rely on royalties should be wary of being made to cover bad debts related to the product. In other words, the company with which they have an agreement may insert a clause allowing it to hold back royalties if customers fail to pay their debts.

Stuart Burns of Fisher Forensics urges those who make a living through royalties to scrutinise the con- ditions in their contracts. "Most publishers or manufacturers play fair, but it is vital to be sure of the terms of the agreement, in case of dispute. The conditions of the income should be enshrined but often this isn't the case. A comma in the wrong place could make a huge difference to the income received by the individual.

"Get the contract checked by an accountant. They've seen hundreds of agreements and understand where the bodies are likely to be buried."

Post-agreement, anyone in receipt of royalties has the right to demand an audit of the books of the com-pany. They can appoint an accountant to do this.

Another way in which people can miss out is if the company is slipshod in tracking third-party use – missing an extract from an author's work being used in a magazine, say, or a musician having their songs played on the radio.

Royalty-collection agencies can help here, checking all sorts of sources for their members' work and invoicing on their behalf. The Authors' Licensing and Collecting Society (ACLS), for instance, says it managed to gather in £13.6m on behalf of 42,000 writers in the past financial year.

Kate Pool of the Society of Authors says: "The ALCS trawls through a huge number of documents published around the world, looking for work reproduced." You can join the ALCS for a one-off fee of £25.

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