Like most companies, the monthly payroll is one of the highest expenses your business has to cover. This can become an issue if you encounter cash-flow problems.
Busy times such as the festive season can also be a burden. You might need to hire seasonal staff, making the payroll even higher.
Not being able to pay wages and salaries as an employer is an awful situation to be in. It may become a legal issue if not resolved quickly.
- what to do if you can’t pay wages
- what the law says about reduced hours and layoffs
- cutting other costs to cover payroll
- short-term finance options
- how LoanAgainst can help.
What to do if you can’t make payroll?
Luckily, there are ways to deal with the issue before it’s escalated. Don’t hide the problem. Have a meeting with your staff to explain the situation and decide the best way forward.
Staff might be willing to accept reduced hours or work days to match what you can pay. Many people will accept this if they know it’s temporary.
If the problem is temporary, a short-term loan is a reasonable option to cover salaries and wages, and to keep the business on its feet.
Layoffs are an unfortunate option but may be necessary. Reducing your workforce may help you to meet your commitments.
With layoffs and reduced hours, it’s usually possible to claim funding from the UIF to help these employees with any shortfall.
If your business has no hope or means of paying outstanding wages, you can file for bankruptcy.
What the law says about reduced hours and layoffs
Legally, you can’t reduce employees’ salaries without their consent. This is why it’s important to discuss any payment issues with your staff.
The process for layoffs or retrenchments has to follow the correct legal procedures. You must be able to prove that your business is going through financial hardship and that you can’t afford to keep the staff in question.
Failure to do so could land you in labour court if the employee decides to go to the Department of Labour or the Commission for Conciliation, Mediation and Arbitration (CCMA) to challenge the retrenchment.
Cutting other costs to improve the situation
Before you despair, examine all your business expenses to ensure you haven’t overlooked any costs that can be cut to cover payroll.
Speak to your suppliers. Ask if they will extend your payment terms or allow you to pay in instalments for a few months.
Check if you have any insurance on your credit cards or other debt that may cover financial difficulties. It might be possible to defer repayments for a few months.
Talk to SARS about tax-relief measures, such as deferrals on payments and fast-tracking VAT refunds.
Using short-term finance to make payroll
Businesses often need to secure short-term finance when encountering cash-flow issues or growth opportunities.
A business loan from the bank or an extension on an existing loan might be an option for a month or two.
If your premises has an access bond, it might be possible to access the amount the business has paid off.
Another option is an asset-based loan. You use a business asset like a company car to secure a loan.
How LoanAgainst can help
At LoanAgainst, we offer fast and discreet loans against a range of assets, including company-owned vehicles.
Because they use an asset as collateral, these short-term loans are quick and simple. They don’t require a lot of paperwork, such as financial statements.
With our short-term loans, you’re guaranteed:
- a simple and discreet application process
- no data sharing with third parties
- fast access to funds, usually paid out within 24 hours
- asset-based and not credit-score based
- competitive interest rates
- NCR regulations compliance.
If you can’t pay your employees and want more information about using an asset to secure a short-term loan, contact us on 086 111 2866 or simply complete and submit our online application form.
