It is vital for the success of your business that you pay your employees on time. While financial circumstances may prompt you to cut costs in any way you can, including delaying pay when cash flow is tight, this can seriously damage your business.

Your employees count on their pay, and by knowing that they can trust you and your business to get them their checks on time, they will be better workers for you.

Impact of Delayed Pay on Employees

When an employee's paycheck is delayed it can have great consequences for employee well-being. Your employees have regular obligations that they need to meet, and if they can't count on receiving their pay from your business, they may need to pursue other avenues of employment so that they can meet their expenses.

Late paychecks can lead to problems with bill collectors and even a precarious housing situation. If an employee doesn't have the funds they counted on to pay their bills on time, it can lead to costly late fees and make it harder to obtain loans or credit for necessary living expenses. If late payments lead to a reduced credit score, it can take time to rebuild, and large purchases have to be delayed.

Late paychecks interrupt an employee's ability to budget properly. A paycheck provides much needed cash flow and also offers an easy way to track earnings. Being familiar with the numbers on their paycheck, such as the YTD meaning, lets them keep an account of year to date wages. This lets them plan for future expenses by knowing what their regular pay is and what they have earned so far that year.

When employees can count on a timely paycheck, they can budget for regular bills and larger expenditures such as purchasing a new car or even a home. When they don't have their pay on time, it can have a large negative impact on their finances and they may no longer show their loyalty to your company, which can hurt your business.

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Result for Employers of Withholding Pay

Your employees work hard for you and in return, they expect and deserve to have their wages paid out on time. Delaying payments to workers can have a drastic adverse impact on you and your business. When your workers don't receive their pay they can become upset and are not as likely to work hard. Your productivity could suffer, meaning that you could lose future business and bring even deeper financial trouble.

Also, if your employees realize that they cannot count on receiving their pay on time, they may choose to leave your business, which can put you in a tough position where you may not be able to meet orders that you have committed to. Legal action could also become a threat. Workers may demand their pay and if they don't receive it they could choose to sue you over it. Being sued over owed pay would create a bad reputation for you and your business and also bring costly legal fees.

For a good relationship with your employees, make sure that you budget properly so you can pay them on time. Even if you find yourself in temporary financial hardship, it's best to find some way to get paychecks out to your workers, including taking out a short term business loan to cover your costs. If you find yourself in a similar situation on a regular basis it may be time to readdress your business model and scale back on expenditures. Consider finding lower cost materials and places to cut corners to get cash flow going.

In order to have a thriving business and the support of your workers, you need to show them the consideration of making every effort to give them the paycheck that they deserve. Make sure that they know they can count on their pay and trust you to help them meet their obligations, so their family and financial status do not suffer.

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