Late Paydays Put Employees (and Employers) at Risk

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Gone are the days of trading livestock for two bags of grain and a bushel of apples, then carrying the whole load home on foot. Imagine how happy our ancestors would have been if they’d had the apps and technology for near-effortless payments and transfers we use today. A quick push of a button and wham! There’s your sheep, suddenly hanging out in the pasture, or your goods, instantly delivered to the pantry.

Of course, today’s tech doesn’t work quite that well. While some apps transfer money instantaneously, others require a couple of days to process. Others take convenience to the next level, offering customers the chance to schedule payments ahead of time.

In 2017, ACI Worldwide published survey results taken from 2,500 consumers across the U.S. The survey found 32 percent of respondents used a program like automatic bill pay to set up recurring payments. From that, we can infer nearly 1 in 3 individuals expects to see cash in their account at the same time each month — enough to cover whatever expenses are being taken out automatically.

Recently, QuickBooks Payroll hosted their own survey, asking participants about their payroll experiences.* What they found could be bad news for those looking to schedule their sheep-for-wheat transfers in advance.

 

Late paydays are baaaaaad news

One in 5 QuickBooks survey respondents said their paycheck isn’t always paid on time. That’s bad news on multiple levels. Without a paycheck, many folks can’t pay their bills. Getting paid late also impacts a person’s ability to set up otherwise-reliable transfers.

When there’s not enough money in the bank, due to inconsistent paydays, pre-set withdrawals could lead to costly overdrafts. And that’s just automatic transfers. If you’re not someone who checks your balance every payday, you might not realize the check hasn’t cleared until it’s too late. The result could be one overdraft after another, dinging your credit and piling on fees.

No wonder 18 percent of respondents also said just a single late paycheck would make them quit their job.

 

Employees aren’t the only ones losing sleep

When it comes to making late payments, employees aren’t the only ones struggling. Chances are if a business owner is cutting checks behind schedule, there’s a reason.

2018 construction cash flow survey

Learn more about combatting cash flow in construction.

According to survey results, employees of smaller businesses (with 20 employees or fewer) are more likely to receive paychecks late. Just 68 percent of these said they receive their paychecks “always on time.” That’s compared to employees of larger companies (with more than 20 employees), among which 82 percent reported always receiving their paycheck on schedule.

Similarly, TSheets ran an article about the construction industry cash crunch. Construction companies are among those known for paying their workers late, though it’s not always the fault of the business owner. Often, it comes down to receiving late payments from clients. For construction companies, there’s a hierarchy for who gets paid first, and employees are pretty far down on the list (download the complete report here).

To counteract this problem, for better or for worse, many construction company owners (38 percent) have taken out short-term loans, just to cover payroll. This rob-Peter-to-pay-Paul approach goes on to affect the likelihood of company growth and even a construction company’s ability to take on future projects.

 

On-time payroll means greener pastures for everyone

Payday should be one event employees can always count on. It’s one of those things that affects every part of a person’s life, from their ability to pay bills on time to having enough money in the bank to purchase a child’s birthday cake. The reality is many Americans are still living paycheck to paycheck, and one late payday could be the tipping point between getting by and getting left behind.

But sending out paychecks on a schedule isn’t just better for employees. Having the funds to pay workers on time is good for business owners as well. If late paydays lead to employee turnover, and perhaps even rumors of imminent bankruptcy, it pays to pay on time, every time.


*Methodology: In 2018, QuickBooks Payroll commissioned Pollfish to survey 1,000 employees (age 18+) from businesses throughout the US about their payday experiences.

15 Comments

  1. Marila Marrero says:

    I think that if the company hire accountants to work on this problem, there wouldn’t be so much problem.

  2. Kyla says:

    TSHEETS IS A GREAT WAY TO AUTOMATE TIME TRACKING AND EXPORT IT TO PAYROLL APPS TO INSURE PAYCHECKS ARE ON TIME. SAVING EMPLOYERS HOURS OF MANUAL CALCULATIONS.

  3. rebecca says:

    This is why I LOVE T Sheets. I have about 20 payroll clients. at least 5 are late in getting me the employee time sheets every week. One of them was SO BAD the employees were showing up at my office with their timesheet scribbled on whatever they could find. This disrupted my office flow, my time and theirs… I finally gave that client an ultimatum – T Sheets or go away! They chose T sheets, for the last 6 months, we are tracking mileage and paying the employees ( usually even a day early)

  4. Robin Hall says:

    TSheets helps make it so this does not happen for us! Thank you TSheets!

  5. I wish everybody used tsheets!

  6. Debbie Bosse says:

    Never late processing payroll if you are well trained and have an awesome app like TSheets

  7. Time saving measures like T-Sheets are an accounting professional’s virtual helper. Saving time is key for me and my business.

  8. Our clients love TSheets. No more old school paper based time-sheets – everything is electronic and hours automatically transfer to our payroll system. Perfect!

  9. Payday is a big expense for many of our customers. We had one client who asked multiple times if they could blame the problem on us to hide the fact from the employees that they were having larger cash flow issues.

  10. Amy Gunn says:

    Having an app like TSheets helps by reducing the calculations of the time so it’s easier to process payroll on time! Late payroll is never a good thing and there should be no excuses!!

  11. Susan Humphreys says:

    TSheets is the best! I can’t think of any reason for not using it.

  12. Caren Schwartz says:

    The importance of proper cash flow management and processes. Especially in small firms, often times the owner is too busy doing client work to focus on things like cash flow and payroll even though this is important. By use of good tools, like Tsheets and a good payroll service, processes can be improved to reduce the time and make sure things are handled in a timely manner.

  13. Jason Jones says:

    I do think TSheets can help with cash flow because it offers the ability to project payroll based off of hours recorded obviously. Of course if a company isn’t making payroll, there are bigger issues at hand as this article points out.

  14. Rebekah B says:

    Yes, late payroll means unhappy employees. That’s why payroll is considered one of the most important areas of my firm.

  15. […] hours worked. As a business owner, Stapper says one of his most important roles is making sure his employees are paid properly and on […]

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