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If You Don’t Pay Your Employees On Time, Can the Federal or State Government Come After You?

Legal FAQ’s: Paying Employees on Time

Can the Federal or State Government Come After a Business Owner or Nonprofit If You Don’t Pay Your Employees On Time?

The short answer is yes. If a business or nonprofit is having problems paying their employees, the federal or/and state government can come after you. Although, you can get in trouble regardless of your circumstances.  The government wants their money in the form of your employee’s payroll taxes.

Furthermore, your employees expect to be paid on time for their work.  They could contact the state labor board if they aren’t. If they do, the state could impose penalties or fines on your business.  The state labor boards take missing payroll very seriously and could even close your business down if you miss it.

Legally, you are responsible to pay your employees minimum wages for the hours worked. However, in most states, you can’t just pay them a portion of what you owe them though.  Some employers will try to have higher paid employees wait for their paycheck and pay their lower waged employees first.  This isn’t the greatest solution though as you are now signaling to some of your employees that your company is in financial trouble and still may be illegal in your state.

What should a business owner do if they can’t pay employees on time?

First, do EVERYTHING you can to not miss payroll. Borrow money from friends or tap any financial resources or personal assets you might have.  Don’t pay any accounts payable and don’t let your employees know until you have no other solutions.

It is usually a good idea to be straight up with your employees and to let them know what is happening. However, it is also important for you to exhaust every option first. Once you tell your employees they are not getting paid, your company runs the risk of losing its most important resource…its people.

I’ve exhausted all my resources, and I don’t want to endanger my relationship with my employees.  However, I still won’t be able to pay my employees on time.  Can my bank help? 

Commercial banks and factors WON’T be able to move quickly enough for you. A bank will require 100% collateral for a line of credit and take months to put in place. A factor will also require a lot of financial paperwork, will contact your clients and redirect their payments to the factor.  This could be a red flag to your clients and signal that your company is in trouble.

Okay, what about furloughing some of my employees?

Furloughing your employees (having your employees take an unpaid leave of absence), might help with your NEXT payroll, but it won’t help in paying your employees on time NOW.  Also, furloughing your employees will, again, signal financial trouble. They will probably start looking for employment elsewhere.

On top of that, your employees DO (or should) make you money.  Furloughing employees can slow down your operations processes which can slow down your sales. If you cut or suspend your staff, be prepared that sales will suffer as well.

Do I have any options left to get my employees paid on time? 

Yes. Call Financing Solutions immediately at 862-207-4118, www.financingsolutionsnow.com. FS was specifically formed to loan money to good companies in crisis situations. We can provide you with a line of credit so you don’t miss payroll. Processing time can be as short as 1 day. Your employees and clients won’t be the wiser and you’ll have this line of credit in case you run into bumps down the road in the future.

Financing Solutions (www.payrollfinancingsolutions.com) provides fast business lines of credit of $5,000-$75,000 to good small businesses and nonprofits with sales of $350,000-$7 million that can be used for working capital.

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