Pay Your Employees On Time

Skyrocketing inflation has made the cost of goods, services and running a business very challenging nowadays.

One thing history teaches us is that this time too shall pass and the good times will return.

Your business.

Whatever size of business you run, if you have employees, then many of those employees rely on a stable paycheck as compensation for the work they do and for their livelihood.

Money is the predominant way in which we all sustain ourselves and a lack of it, impacts many of the choices we make in our lives. In fact employees consider this when selecting a place to work hence any irregular payment that impacts their income negatively will also impact their productivity and subsequently your business. The culminating effect of this is an employee's pay has an almost direct relationship to your business success.

Let's be fair things are tough for businesses at the moment and employees aren't having it easy either. The news is awash with the effects of subsidy removal and currency float amongst others. A small or challenged business may think the best approach is to delay paying employees or not paying terminated employees to save money. This is incorrect and will not only impact the way employees view your business but will ultimately negatively impact you as well.

Although there are legal consequences for neglecting to pay your employees it's still not robust enough to deter employers from taking this path hence there are still too many frequent occurrences where employees have to put up with receiving wages less than the minimum wage for full time work, tolerating late or skipped paychecks for months and enduring terminations without pay. The sooner the bill to prohibit non-payment of salaries and pensions that's being proposed in a legislation titled "A Bill for an Act to Prohibit Late Payment, Non-Payment and Underpayment of Workers’ Wages, Pension and Other Emolument in Nigeria, and Prescribes Penalties for Violations" becomes law the better it'll be for many Nigerian workers.

Why you should pay your workers on time.

Nigerian Labour Act; Section 15 - Simply put the act says so i.e. "Wages shall become due and payable at the end of each period for which the contract is expressed to subsist, that is to say, daily, weekly or at such other period as may be agreed upon: Provided that, where the period is more than one month, the wages shall become due and payable at intervals not exceeding one month."

Unemployment Insurance (UI), Also Called Unemployment Benefits (UB) Doesn't Exist - Typically funded from taxes, UI or UB is a type of government provided insurance that pays money to individuals on a weekly, bi-weekly or monthly basis when they lose their job and meet certain eligibility requirements. Whilst there are some private entities that provide insurance on lost income this relies on the employee (insuree) purchasing a lost earnings policy, at their own expense, so if their not paid or their job is lost they receive income for a predetermined number of months. Currently, there is no equivalent UI or UB provided by the Nigerian government.

Remedying Breach Of Contract By Employer - An employee that suffers discrimination at the work place, unreasonable variation of the terms of their employment contract, unlawful dismissal or unfair termination of their contract of employment can sue an employer for breach and obtain one, or more, of the following remedies

⦿ Reinstatement or reengagement (subject to the mutual consent of employee and the employer).

⦿ Award of terminal payments.

⦿ Award of monetary compensation.

Strategies if you can't afford to pay your workers.

Whilst some workers may have a side hustle supplementing their income, others are dependent on their paycheck. So if an employer is in a situation where they are unable to pay employees on time, there are a number of strategies they can embark on such as: determining where costs can be cut; exploring perhaps other lines of business worth investing in to supplement core offerings; giving some employees time off until things improve; seriously considering downsizing to the minimum workforce that can continue operations; changing the way employees are hired perhaps using independent contractors or freelancers for a predetermined period; or taking on part-time employees if that would better serve their current business model.

Sometimes there are no easy answers but not paying wages is just not one of them. When an employee’s pay is stable, they spend more time focusing on their job and aren't distracted by worrying much about their financial security. When an employee is not paid on time, they are more likely to be worrying about daily expenses, thinking about finding another employer rather than focusing on work. Besides the costs associated with loosing an employee and having to find a replacement can be steep i.e.

Lost Productivity – On average it takes an employee 3 months to start getting to grips with a position. Imagine the lost productivity of going though this cycle frequently.

Workplace Impact – Employees might become concerned by high turnover and, for example, start looking for other jobs affecting their productivity and the culture of the workplace environment.

Hiring Costs – Cost of recruitment, time spent interviewing and screening potential applicants all, temporarily, consume time that could be spent growing and improving the business.

Training Costs – This includes all direct and indirect training related to the business including onboarding and knowledge transfers. The more turnover you experience the more this cost increases.

Legal Impact – The potential repercussions if the wages owed are significant and legal orders are brought against the employer with fees to pay.

Job Applicants Perspective – It's no secret that word tends to get out fast and when potential applicants learn that there are delays in paying staff expect them to be cautious in joining or demand a premium to join with some guarantees on pay.

Paying your employees on time is heroic.

Is it worth it not to pay your employees on time or not at all? The answer is clear - no it isn't.

So it makes sense for employers to have a strategy in place to deal with external and/or internal shocks that can affect their ability to pay their employees on time, each and every time. It's a win-win for both employees and employers.