What to do if you fail to pay employees' wages on time

Paying your employees in a correct and timely fashion is a fundamental responsibility. However, mistakes and unforeseen circumstances can occur.

author

James Rowland

Commercial Director James leads Account Management, Sales and Marketing at Neathouse Partners.

Date

15 May 2019

Updated

11 July 2024
2 min read
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What to do if you fail to pay employees' wages on time
3:21

As an employer, paying your employees in a correct and timely fashion is a fundamental responsibility. However, mistakes and unforeseen circumstances can occur, leaving you unable to complete this part of the payroll process as agreed. Wages not paid on time is one of the most common complaints of the modern worker, and employers must take it upon themselves to handle this situation in the right manner.

Here’s all you need to know about the legalities and practicalities of not paying staff wages on time.

 

Wages Not Paid On Time: Why It’s A Problem

A slight delay in paying wages may not seem a big deal to the business. After all, the company faces delayed payments on revenue throughout the year without major repercussions. Unfortunately, the situation for individuals is vastly different.

Most worker naturally schedule their direct debits around their payday. So, even a slight delay on payments could cause cash flow issues that impact their credit ratings and lead to charges on their personal accounts. Even when this isn’t the case, the inconvenience is not something that employees will appreciate, which can disrupt morale and productivity.

From a legal perspective, this is technically a deduction of wages and can also break the terms of the employment contract. Given that the Employment Rights Act 1996 states that the date on which they will be paid should be included alongside other details such as how they’ll be paid, breaking the contract could potentially lead employees to seek legal action.

In truth, this is unlikely for a single case of a 48-hour delay on payments. However, long-term or repeated delays can bring serious problems. In fact, employees can sue for consumption of up £25,000 if the courts declare that a breach of contract has occurred.

 

How To Handle Delays

First and foremost, it’s important for all employers to accept that things can go wrong from time to time, even when dealing with fundamental features like the payroll. Likewise, the fallout of faults in other areas of the venture can often disrupt payments.

Ultimately, though, there are three things every employer should do throughout these difficult moments. They are:

Maintain transparency and clear communication

Whether it’s due to an error by HR during the payroll processes or because funds from a major client haven’t cleared, you must advise employees of potential problems that could occur with their next pay packet. They might not like it, but they will respect you while it also gives them the best chance to think of contingencies.

Investigate the situation

Getting to the bottom of the issue is vital if you wish to prevent repeat situations from surfacing. When you successfully do this, it becomes possible to put employee fears to bed by providing reassurance over their future payments. Failure to do this is asking for the same problems to occur further down the line.

Consider the long-term implications

Payment delays may be caused due to bigger problems that require drastic measures. This could include making redundancies. Redundancies should be handled carefully, and employers should seek legal advice to avoid costly claims for breach of contract or unfair dismissal.

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