Can’t Pay Employees Anymore?
Can’t pay employees anymore because of Coronavirus COVID-19 PANDEMIC?
The COVID19 pandemic has had a major impact on people’s lives and businesses throughout the UK.
It’s stressful when you don’t have the money to pay my staff, and it affects both of us.
Employees usually rely on the company for income. As does your company depend on the employees to then operate.
Employee Guide to Insolvency.
Paying Your Employees
Deciding how much to pay employees, along with ways to pay salaries, is one of the first things a business owner does when they start up. Getting the right balance remains important, as this may affect employee performance and loyalty. So when a business enters financial difficulties, paying your staff has a major pressure on the owner. If you want to save money, it’s important to get rid of redundant stuff, handle the redundancy payments correctly, and make sure you don’t go out of business.
For further assistance, contact John Waller on 0800 612 5448.
Reasons why the Company can’t afford to pay my employees?
- Insufficient cash flow.
- May the problem be short term?
Notwithstanding, it may however be a more significant issue?
- Sales decline;
- A bad debt;
- Loss of a contract;
- Or slow-paying debtors.
I can’t pay my employees?
Can’t afford to pay employees? – So What Options Do I Have?
As a director, you must ensure you are not trading insolvent. If your inability to pay employees is a short term issue, and you can identify why and then correct the cash flow, then excellent. Once you are assured, the business is a going concern. Then consult HBG Advisory for assurances moving forward. 0800 612 5448
If your company has potential issues, it can’t resolve and drifts into insolvency. You may therefore need to cease trading to avoid trading while insolvent.
At this point, you need to seek protection. Consult a Licensed Insolvency Practitioner at HBG Advisory. (The Team at HBG Advisory). We will deal with creditor claims and employment issues, including employee redundancy pay.
If, you consider, the problem is short term only, then:
- Speak with the employees earlier than later, asking for extra time to pay. It would be best if you were assured of your company’s viability moving forward.
- Discuss an achievable time scale to pay them;
- Investigate honestly why your business remains unable to pay them;
- Plan how you can cut costs without making the situation worse.
For further information, please view ‘what happens to my employees in a liquidation‘?
Considering Insolvency. Business formally Insolvent
If your business is not viable and insolvent, the directors have a duty to protect the creditors of the business, ensuring the position doesn’t get any worse for creditors.
Failing to pay employees therefore means they are a creditor of the business.
Directors should get advice from a licensed insolvency practitioner immediately, making sure to follow the rules. Further, you need to plan the best outcome for your business employees.
We at HBG Advisory will guide you through the available options for your business.
When employees are furloughed.
When you have placed your employees on furlough, you may not ask them to perform any work that:
- earns money for your business or in any way associated with your business.
- Provides services for your business or any associated business.
Apply For A Loan
As with the above, you need assurance of your company’s viability. Ensure any short gain by a loan does not add to long term debt which the company may fail to pay in the long run.
How Viable Is Your Business Plan?
If your business plan demonstrates robust growth with profit, a company may continue trading while paying its creditors.
Invoice factoring applies to B2B type businesses. A business may raise commercial finance for the delivered value of its singular or batched invoices. This helps companies grow faster than cashflow.
Take care when considering this option. If sales are declining, you may also add to your operating costs.
Many commercial finance options exist with varying interest rates.
If you have a business model viable to your business, often bank loans may be the cheapest option.
What Else! If All Else Fails?
What can you do if your employer can’t pay you?
Suppose your employer has not paid your wages for work you have carried out. Under UK law, any unauthorised deduction from wages then entitles you to proceed with a claim using an employment tribunal.
It is considered a breach of your employment contract to withhold money without your authority as per your employment contract.
Changes effected May 2014 to employment tribunal mean that before bringing any tribunal claim, you now need to complete an ACAS Early Conciliation Notification Form.
How HBG Advisory may help
We can offer many options, including assistance with invoice financing, providing the business is still viable?. Equally, there may be ways to rescue or restructure the company.
So, if the business requires closure, the HBG team provides robust commercial support to close it cost-effectively and legally.
The sooner company directors seek help, the more options exist.
Handling creditor pressure
Handling business debt can be unpleasant for both the debtor and the creditor. Creditors’ pressure can spiral out of hand. If a business faces unflagging creditor pressure, understanding how to deal with it eases the situation for both sides.
Creditor harassment is different from rational action, so it’s important to know when creditors are being too forceful.
If you are confident your business has a future, but no ability to pay employees, HBG Advisory can advise on your next move.
Contact: John Waller on 0800 612 5448