Not enough money to pay staff

[Tessah]

Does anyone know where a employee stands if they are told there is not enough money to pay wages on their agreed pay day?

It seems wages are being planned to be paid but on a hierachy or ad-hoc allocation from the small amount of money available. The balance to be paid when more money comes in 2 - 3 weeks later. I would like to advise a friend on their position as they haven't seem to made the 'pay list' and choices available.

 

[E Storey]

Well what do you want the company to do if there isn't enough money? They can't magically make it appear.

I suggest your friend looks into if this is a temporary problem or a sign of things to come then starts looking for a new job.

 

[Rhodes100]

Legally they may be in fundemental breach of contract, perhaps if your friend reminds them of this fact they may make the list!

 

[saxondale]

Legally they may be in fundemental breach of contract, perhaps if your friend reminds them of this fact they may make the list!

or the other list headed "redundancy" ..........

 

[E Storey]

Legally they may be in fundemental breach of contract, perhaps if your friend reminds them of this fact they may make the list!

This is exactly the kind of reply the OP was hoping for!

Some poor sod is doing their best to keep a business afloat. Clearly they should have already made people redundant but have tried to keep them on. What do they get in return.... the "I know my rights" brigade. If the company has no money it doesn't really matter what he is entitled to as THERE IS NO MONEY TO PAY HIM!!!!!!!

So yeah... go to court and get the court to order a payment..... there still won't be any money to pay! Arguably there will be less as the company will have paid to attend court. then try to get it enforced, spending more money, then the company will fold, by which time you may get a small amount of redundancy from the government instead, but you will not have a job and in this economic climate not much prospect of getting one either!

Suddenly not getting wages on time, or even missing a months pay does not seem as bad as a couple of years on the dole (if you're eligible).

 

[dynamic08]

Some people have kids to feed and do live week to week. It is unfair to assume that everyone can just stomach it and live on.

 

[arcon5]

We're all quick to jump to their companies defence but what about that "poor sod" who can't their pay rent this month? Falls behind with utility bills? Can't feed the family? ect ect.

Okay the company doesn't have any money to pay the staff so maybe the best advise is for ops friend to get out and quickly find new employment or additional part-time work rather than demonising them for coming here for advice!

Maybe there are some sort of g'ment scheme or some benefits available in these situations which op would find beneficial..?

 

[Rhodes100]

The company however should not be using their employees as a source of finance, who have their own bills to pay and may lose their credit rating due to their employers poor cash management.

Shame on this employer.

They are getting money in, in two weeks time, if these are invoiced debtors they could factor the debt rather than take the liberty of not paying staff so that they lose their home.

 

[stugster]

The company however should not be using their employees as a source of finance, who have their own bills to pay and may lose their credit rating due to their employers poor cash management.

But they are. So, there are therefore two options:

1) Support the company having the financial difficulties, put in that little effort to get things afloat, and then likely be rewarded by the owners down the line.
2) Jump ship and get out.

Those are the two options. If you can't afford to do number 1, then the decision is obvious.

 

[Christine Hough]

So you know you cannot afford to pay staff, but rather than face the issue, you take their work for nothing?

I doubt any of them will reward the company with loyalty.

This 'poor me' attitude devalues most business owners who take the hit themselves when thing unexpectedly go wrong and don't expect staff to take the hit when all they have done is give loyalty! And if there is no alternative they face the staff explain the situation and devise a clearly fair scheme of when people can expect payment and how much.

Best employers even involve the staff in the decisions.. a general wage cut for all vs some redundancies. You may find that honesty in bringing them into the situation unleashes more support and creative ideas than you would imagine.

From the OP it sounds as if the employees have been kept in the dark and do not know what is happening.

With employment comes responsibilities and if you don't want them don't employ people.

Agree though that going to court is a waste of money all around.

 

[stugster]

So you know you cannot afford to pay staff, but rather than face the issue, you take their work for nothing?

Oh, I'm sorry. I didn't realise you knew the exact circumstance for them not being able to pay their staff. Silly me.

 

[Christine Hough]

Some poor sod is doing their best to keep a business afloat. Clearly they should have already made people redundant but have tried to keep them on.
.

Responding to E Storey's post
Making it sound heroic to keep people on knowing that you cannot pay.

From the OP this was without being upfront and letting the employees know the situation.
An open and negotiated situation would be quite different.

 

[stugster]

I don't think he was making (the company) sound heroic at all from what I read. I think he was being realistic about the big issues surrounding the point raised from the OP.

We have a business that is unable to pay its staff. We have no idea whether things are really bad and that they're about to go under, or if this is just a small hiccup in their cashflow (waiting on a loan to clear, debtor a few days late paying).

What would be nice though, is that the employee who obviously hasn't had this problem before (the OP would surely have mentioned this) could front it out and support their employer to keep their job. They've been told (by the sounds of things) that there isn't just a problem, but that there is a planned payment schedule and why they're doing it.

In fact, I'd argue that the business owners have been pretty reasonable in terms of keeping their staff informed of the situation.

Now, assuming this is just a hiccup, and the employee sticks it out, I wouldn't be surprised if the owners of the business showed their appreciation for the delay in remuneration by way of a bonus or time off (or whatever).

Assuming it's not, well, the employee will soon know about it.

Then we have the issue of whether or not the employee can afford to stay on with the delay, or non-payment. This is a decision made by only that particular employee based on his financial situation, and hopefully not a forum of people who are just guessing.

The two options still stand as aforementioned.

 

[stugster]

Christine, having read my post I quoted you in, I don't think my sarcasm/humour comes across as "light hearted" as it was meant to. I didn't mean to cause offence, if I did!

 

[Christine Hough]

Hi, No never worry, no offence notice or taken!

I am not immune towards business problems nor that employers are having to project into an unknown future. Just wanted to put the other side that you are taking resposibility when employing people.

In the end I think much depends on the communincations.

 

[BobJamesCo]

It is one thing for a company to get themselves into a position where it is difficult to pay bills, But to not pay your staff is disgracefull.
I bet that the staff do not get a bonus during the good times

The strange thing about this thread is that there are people who do not see this as wrong. Perhaps they are the self employed version of the Benefit Fraudster who think others should pay for their lifestyle.

Personally I would ring all their customers and put this company out of its misery.
Bob

 

[E Storey]

It is one thing for a company to get themselves into a position where it is difficult to pay bills, But to not pay your staff is disgracefull.
I bet that the staff do not get a bonus during the good times

The strange thing about this thread is that there are people who do not see this as wrong. Perhaps they are the self employed version of the Benefit Fraudster who think others should pay for their lifestyle.

Personally I would ring all their customers and put this company out of its misery.
Bob

Yes and put the employees out of their misery too!

If the employee may not be able to afford to be paid late, they most certainly cannot afford to lose their job.

It doesn't really matter on the legal/moral rights or wrongs, the situation NOW is there is no money to pay them. We can pontificate about it all we like here on the forums and it won't make any difference.

I would suggest the employee starts looking for another job, perhaps offers to take reduced hours, or an unpaid sabbatical? Each of these are constructive courses of action. Getting a "friend" to solicit quasi legal advice over an internet forum is tbh, not productive or likely to be of benefit to either employer or employee.

 

[stugster]

It is one thing for a company to get themselves into a position where it is difficult to pay bills, But to not pay your staff is disgracefull.
I bet that the staff do not get a bonus during the good times

The strange thing about this thread is that there are people who do not see this as wrong. Perhaps they are the self employed version of the Benefit Fraudster who think others should pay for their lifestyle.

Personally I would ring all their customers and put this company out of its misery.
Bob

Bob,

Who doesn't see this as a crying shame? I for one think it's disgraceful that the company is in this situation, but that wasn't the point of concern. The concern of the OP was what action could be taken.

Suggestions that you would ring all their customers to put the company out of its misery is of no help at all in this thread, let alone the business forums.

You and I have no idea what circumstances lead to the cashflow issue within the business. What if someone died tragically and the company has had to spend much more money than they previously budgeted for an investigation, solicitors, et. al.? Do you still think they deserve to be put out for that?

What if an employee was later found to have stolen £30k, hence the reason for the rest of the staff not being paid. Still appropriate for the slander around all the customers?

I think what we need to appreciate here is that there is far too much conjecture and speculation, and that the main points to consider have already been addressed. Going off on vendettas against a company or anybody for that matter, without any facts other than a few lines from a thread starter, is hardly professional.

 

[Drpepper]

The employees they have one big advantage in being an employee - they simply leave and find other employment or sign on.

In the past I have taken delayed wages within a small business to keep it afloat, didn't even occur to me to try and destroy the business as some have suggested, what is wrong with some people :|

 

[KidsBeeHappy]

I think that it all comes down to communication and awareness. And that needs to be in both directions.

I have been in payroll departments where the staff were making MASSIVE adjsustments to peoples wages on a fairly random and unpredictable basis. They had completely lost touch with the fact that these weren't numbers on a report, but a family's ability to survive and pay the mortgage each month.

It appears as if the "list" has been compiled without discussion, which means that employees individual circumstances haven't been taken into account. And it isn't fair to ask employees to take their pay as and when it's available. That's not exactly something that they can pass onto their mortgage company, credit card company etc etc etc.

Equally. If the compnay had been upfront, and explained the situation. Instead of paying 1/2 the people paid all of the people 1/2 of the amount and was able to give a timetable of balance then that would help. Additionally, employees do deserve a reassurance that this is a temporary situation, or if not then the company needs to take some hard decisions.

 

[Rhodes100]

The employees they have one big advantage in being an employee - they simply leave and find other employment or sign on.

In the past I have taken delayed wages within a small business to keep it afloat, didn't even occur to me to try and destroy the business as some have suggested, what is wrong with some people :|

This is a contractural relationship and in a contract both sides are expected to comply with it, the employees have, you would expect the employer to comply by paying them.

So if this company was a customer of yours and they told you that they cannot afford to pay you then you would not take them to court to "destroy them"? But still carry on providing products and services to them, of course you wouldnt.

As I said in a previous posting, if these guys are expecting the money in a couple of weeks and they have invoiced their customer then they should factor or use invoice discounting services for the debt and pay the employees immediately.

Of course the employees may not decide that it is far too risky working for this employer and the best ones will perhaps look for a job elsewhere.

All of this, the lack of funds and the way they have dealt with it is the managements fault.

 

[Drpepper]

This is a contractural relationship and in a contract both sides are expected to comply with it, the employees have, you would expect the employer to comply by paying them.

So if this company was a customer of yours and they told you that they cannot afford to pay you then you would not take them to court to "destroy them"? But still carry on providing products and services to them, of course you wouldnt.

Not all invoices can be factored and like discounting is just reducing their future capital even more - not solving the problem just delaying and exasperating it.

Your analogy with a business customer doesn't hold water, many suppliers at this time of year are receiving delayed payments by two or three months. Most have the good sense to talk to their customers and accept late payment. This give them their cash and continued custom for years to come, every one wins.

 

[KM-Tiger]

What's that old saying - "If you've never had to meet a payroll ..."

Impossible to judge without knowing why the company has no cash, there are a multitude of possible reasons.

I agree that good communication, combined with scrupulous fair play, could save the day. Most would rather accept the blip and keep their job.

 

[Rhodes100]

If they cannot factor the debt then they should go to the bank to obtain short term finance. If the bank refuses then perhaps it is because the bank realises that the business has no future.

I remember reading Duncan Bannatynes autobiography where he said that he was happy if someone sued him for money as he knew he had a few months to pay it - if he thought that was acceptable its up to him - but do not use your employees as a source of finance it will destroy your business.

 

[Drpepper]

If they cannot factor the debt then they should go to the bank to obtain short term finance. If the bank refuses then perhaps it is because the bank realises that the business has no future.

I remember reading Duncan Bannatynes autobiography where he said that he was happy if someone sued him for money as he knew he had a few months to pay it - if he thought that was acceptable its up to him - but do not use your employees as a source of finance it will destroy your business.

There is a big difference between being an agent for selling businesses than actually running something that requires stock, premises, staff, PAYE, business rates, VAT, services, consumables etc etc. That all requires cashflow which can and does get very tight for various reasons, and when it does suppliers and employees need to work together for the benefit of all.

It's all very well to quote "contracts" etc, but if there is no cash then........

 

[Rhodes100]

Rubbish, there is no difference between running an agency and another business - all businesses that do not receive all the payment up front requires cash flow.

It is the management/owner who is in control of every aspect of that business who should have forseen the lack of cash - but do not use your employees as a source of finance.

 

[Drpepper]

Rubbish, there is no difference between running an agency and another business - all businesses that do not receive all the payment up front requires cash flow.

It is the management/owner who is in control of every aspect of that business who should have forseen the lack of cash - but do not use your employees as a source of finance.

OK, you don't get paid £2,000 for a deal. What are your cost out of that that have to paid - rent, rates, vat, staff, PAYE, stock?

If you did have these costs, how would predict and then manage not receiving that cash?

It's all a bit different when you have real business expenses and don't work from a back bedroom.

 

[house cleaner]

I had the same problem and unfortunately if the company doesn't have money the court can not do anything about that. They are not able to force them to pay, so it is better for you to find another company.

 

[Podge]

If a company tells their staff before they have done the work that they may not be able to pay them at the agreed time because of casflow problems the employee can then make a choice whether or not to work.

If you allow your staff to work for you knowing that you will be unable to pay them at the agreed time but not tell them that, why the hell should they have any loyalty to you at all.
Being an employer should carry certain level of resposibility. Alas too many employers these days fail to realise this.

 

[Drpepper]

If a company tells their staff before they have done the work that they may not be able to pay them at the agreed time because of casflow problems the employee can then make a choice whether or not to work.

If you allow your staff to work for you knowing that you will be unable to pay them at the agreed time but not tell them that, why the hell should they have any loyalty to you at all.
Being an employer should carry certain level of resposibility. Alas too many employers these days fail to realise this.

And a thousand times more employees feel no responsibility to their employers.

 

[thetime22]

You can shut the company down, sell everything and pay your employees.

 

[Drpepper]

You can shut the company down, sell everything and pay your employees.

With what, you are presuming there are tangible assets?

And the staff are then unemployed as well.

 

[Alan R Price]

The employer seems to have severe cash-flow problems and is probably insolvent on a cash-flow basis. Forget the reasons and rights and wrongs of the situation - we can only speculate blindly about the causes, to no purpose. Realistically, the employees resigning and suing the employer if they don't get paid will in all likelihood simply result in their figuratively pouring their money down the drain.

In practical terms, a good/responsible employer in this situation should inform the employees of the position so they can decide what they want to do. The problem may be temporary - it may be that the employees can be part of the solution by changing work structures, remuneration methods or agreeing to wait for all or part of their pay while a rescue plan is formulated and implemented. It may be that some of them will have to be made redundant to save the jobs of the remainder. The simple fact is that if the company does not have the money to pay them, it can't pay them - righteous indignation and needs of individual staff members regrettably become insignificant. Forget the moral implications, we are talking about money not growing on trees.

The directors should be formulating a rescue strategy or taking professional advice to see if a rescue is possible and then sharing this information with the staff. If the business can be rescued then some or all of the jobs will be preserved. If it can't then, sadly, the jobs will be lost.

My advice to employees would be not to resign for the time-being. Unless they have a cast-iron job offer to take up elsewhere they should wait and see what management intends to do to resolve the situation. Resigning now could mean that employees would lose their rights to claim redundancy pay and other entitlements if the company went into a formal insolvency process such as liquidation or administration.

We do not know all the facts, so apportioning blame is futile. The important thing is that the employees press the directors to be as open as possible so they can make their own decisions about what to do next. The directors have a duty to be open with the staff since if they allow staff to come to work without being absolutely confident that there will be enough money to pay them, they could be acting illegally.

It is not unusual for companies to be rescued from these situations and very often part of the rescue process is that employees have to wait to be paid; but their jobs may well be secured in the long run.