Covid-19 has caused widespread economic stagnation affecting even the most stable businesses. Among other things, an immediate concern for most businesses is cash-flow disruption. In such a market, it is not unusual to see employers being unable to pay their staff on time. Will there be any consequences for firms that regularly delay paying their employees? Is it illegal to pay employees late? Read the guide below to find out:
Is it illegal to pay employees late?
Paying employees late can open up an employer to two types of potential claims:
Unauthorized deduction of wages: The Employment Rights Act 1996 consolidates the law regarding the various rights available to both, the employer and the employee. According to the Act, paying employees late is considered an unauthorized deduction of wages and therefore, is illegal.
Breach of contract: Since most wages and payment dates are included in the contract of employment as a term, non-payment of wages on or by the specified date can result in a breach of a contractual term on behalf of the employer.
How can employees claim for unpaid wages?
Getting paid on time for your work is an important aspect of a job. People often arrange payments such as bills and insurance payments around payday. Not receiving your salary in time can be stressful and frustrating more so if you do not have sufficient savings to dip into.
- Informal Complaint
In case you have not received your salary on time, the first thing to do is to have an informal conversation with your boss or your firm’s human resources department. This will help rule out the possibility of any technical error in the payroll process that may have prevented you from receiving your salary. If this is the case, it can usually be corrected quickly.
- Talk to your trade union
If you are a member of a trade union, they might be able to speak with your employer on your behalf and encourage them to pay your salary in time. If you are not a member of a trade union you can join one.
- Early Conciliation via Acas:
If you still find yourself unpaid or underpaid, you can choose to bring a claim against your employer through a trade union tribunal. However as of 2014, you are required to consult Acas, an organization that helps resolve employment disputes, before you take your firm to an employment tribunal or court.
Acas will then raise a grievance with your employer on your behalf and try to reach a settlement giving you a chance to claim your wages without a legal dispute. This is known as an ‘early conciliation’ process. You can find an online form to apply for an early conciliation here. In most cases, this sort of intervention is enough to make an employer pay their employees the wages they owe them.
- Start a case against your employer in a tribunal
If Acas too, fails to reach an agreement with your employer, you may then proceed to start a case against your employer in a tribunal. At this point you can choose to hire a lawyer to represent your case in the tribunal, however, it is not necessary as most trade unions provide trained officers to represent your interests. The tribunal will hear your claim, make investigations, and collect evidence. It has the authority to direct your employer to pay you the full amount you are owed.
Note: If for some reason, it is not possible to hold a tribunal hearing, you will have to take your employer to court but this will incur some legal representation and court fees!
How should employers handle complaints?
Cash flow problems are not unheard of and if an employer does not have the funds to pay his employees, they simply will not be able to. What steps can you take to mitigate the potential strain on your relationship with your staff? How can you protect yourself from large settlement compensations if you have breached your duty towards your employees?
- Open Communication:
If wage payments are delayed, it is best to maintain open communication with your employees. If late payments are foreseeable, employees should be warned well beforehand so they can make timely financial arrangements. Employees should be reassured and the employer should seek to rectify the situation as soon as possible in order to avoid possible disputes. The more information that is provided to employees, the greater the chance of them understanding the situation before they choose to file a claim. Even if they do claim for their wages in a tribunal or court, an open and understanding attitude towards your staff will allow for a far more lenient settlement later.
- Records and addressing complaints:
If a potential dispute does arise, it will be in a firm’s best interests to have all financial records of payments made to employees at hand. These records will usually be the first item summoned by a tribunal therefore one would benefit from keeping them well maintained.
Complaints should be addressed seriously and employees should be provided access to their associated payment records. In case the dispute is over part of an employee’s wage, the employer should continue paying the undisputed part of the employee’s wage.
- The bigger picture:
If an employer regularly fails to pay his employees in time, it could signify problems within their business or payroll process. Such employers should look into cutting costs to better manage their cash flow. Employers can also look into outsourcing their payroll processes to avoid unnecessary distress to employees.
Moreover, it is important to note that paying employees late not only results in legal consequences but can often permanently damage your relationship with your employees. Being consistent with payday shows an employer’s appreciation for the work their employees contribute leading to greater productivity and loyalty to the job.
Head over to our employment law section for more information and guidelines.