How can struggling companies get loans to cover staff salaries or avoid layoffs?

Table of Contents

• What could be the after-effects of not paying employees on time?
• How does poor payroll affect employees?
• How does poor payroll affect employers?
• How do you help an employee who is struggling financially?
• How can we prevent layoffs?
• Bottom line

A stable workforce determines a company’s productivity and success.

If you are struggling to pay off the employees, you have a serious problem. Well, not being able to pay off the staff is just the beginning. It may affect other important payments too, like HMRC, suppliers, manufacturers, etc. If this pattern continues, your business may soon enter insolvency.  

You may lose your employees, your reputation, and of course, the client base. So, what can you do to avoid this scenario? You can check over business loans to protect the business and pay off staff. It could help you fund the need without worries. You may get a loan for business online and offline, depending on your finances. The blog discusses the aspects in detail. 

What could be the after-effects of not paying employees on time?

Not paying employees timely may impact businesses and the individuals equally. Employees may struggle to pay their bills on time, leading to stress and anxiety. On the other hand, delay in releasing the payrolls may provoke legal actions, affect reputation, and make it difficult to retain talent. Here are other aspects that may impact the employers and employees under non-payment: 

How does poor payroll affect employees?

• It reduces the morale to work.
• Affects their short and long-term goals, leading to more debt 
• It may affect health, relationships at work, and family life 

How does poor payroll affect employers?

• Failure to pay salaries timely may lead to lawsuits.
• Breakdown of the employer-employee relationship over trust issues 
• In some cases, employers may face fines for late or inaccurate payments. 

How do you help an employee who is struggling financially?   

The first thing you can do is try to arrange cash and pay the employees’ salaries. For example, you can leverage invoice finance. It helps you get money against the unpaid invoices.  

As a part of it, the creditor receives their fees after the client’s payment clearance. It could be an option if pending invoices are sufficient to cover the payroll needs. Alternatively, “How do you help an employee who is struggling financially?” Here are some ways you can:  

Consider unsecured loans  

Yes, you can tap an unsecured loan for business purposes. Identify the total amount you need to pay off the salaries. Check the basic approximate loan costs by pre-qualifying with different providers. Determine the amount that you can afford to pay back comfortably. Basically, you need a good credit rating to get affordable unsecured loans for business needs.  

However, you can ease up the costs by providing a personal guarantee. It is an agreement between you and the creditor that states that the creditor can claim the personal asset if the business fails to repay the dues. Under this, you can provide personal, business assets, or a guarantor as security to get a higher amount.  

Subsidise food costs  

Most employees spend around $10-15 per week on just lunch alone. Here, you can help them by subsidising the employees’ meals. You can introduce free lunch, breakfast, or tea breaks as refreshments at the office. It helps them save money on lunch and other eating aspects. Moreover, timely lunches and breakfasts boost productivity at work. 

Pay at least minimum wage  

If not full, try to pay at least some of their dues for employees to meet their basic requirements.  Paying even half of their salaries will somehow help them. You may need to consult your accountant and the CA in person to discuss the possibilities. Moreover, it will help retain the faith of the company in the employees’ minds.  

Release non-utilised holiday pay 

Yes, every company has an account of employees’ paid and unpaid holidays. Therefore, if employees have not utilised their paid leave, provide leave encashment. It may prove enough to at least survive the very month or the delay in the salaries.  

Consolidate business debts  

It is one of the quickest ways to get some cash against the pending debts. Yes, you may utilise the pending payments to free up some cash. You can check bad credit loans if you have not repaid the dues for several months. The delay in payments affects your credit score drastically. Thus, a low credit loan may help you there. Check out the most expensive debts and consolidate them. It helps you save money on interest and total repayments. It also boosts your credit score.  

How can we prevent layoffs?  

The basic way to avoid layoffs and resignations is by communicating issues clearly. Discuss the current condition of the business and disclose the truth- you cannot pay them the salaries. Doing so a month before helps the employee prepare accordingly. It also creates sympathy and a sense of belief among employees and prevents resignations. Here are other aspects to try:  

Reduce the working hours  

Yes, it could be a temporary thing that you can try unless the business situation improves. Giving relief on working hours can ease the employee’s stress. They could use the extra time to research part-time jobs or online gigs to support bills.  Moreover, it will help them spend more time with family and alleviate stress.  

Provide constant counselling and support 

Just like you, your employees also suffer the impact of the company’s business loss. Thus, you must take sincere efforts and initiatives to help them cope with that. Provide mental health counselling, stress-relieving workshops, and 1:1 check-in with a manager. Talking directly is something that employees look forward to in this situation. So, do not let them down and clear their queries.  

Help the employees with debt payments 

You can provide the facility of payment splitting. In this, the company can pay off the employee to tackle important payments like rent, utility bills, and mortgage separately. It will help the employees to be on top of major payments and avoid late penalties.  

Moreover, this also prevents the employees from entering a debt trap. Relieving employees from debt stress could be one of the best answers to your how can we prevent layoffs query. It may instead boost the company’s reputation among employees and the market. 

Provide payment confirmation date 

Employees need validation of when they can expect their salary dues. It gives them the reassurance of getting the income, and it proves to be the greatest stress reliever. It also shows that you act in good faith. Thus, even if the issues escalate later, it would not affect your relationship with employees. 

Alternatively, if you cannot provide a confirmation date, check Salary Sacrifice Arrangements. In this, the employers free up the right for the employee to receive a part of their salary in kind. It could be non-cash benefits. Thus, in this way, you can provide indirect support to employees. 

Ask employees- how can you help  

If you cannot figure out what aspects may ease an employee’s trouble, ask them. You will get n number of ways in which they could be helped. Understand the best ones or personalise each experience to retain one of your best employees. Where the employees feel cared for, they never leave! 

Bottom line 

These are some ways in which struggling companies can address the staff regarding salary delays. It is about ensuring the best understanding between the employees and the employers. It is about repositioning trust among employees in such a tough phase. Identify how you can help employees with the salary shortfall. 

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