Lack Of Capital, Lack of Employees, and Lack of Time Contribute to Missing Payroll
Many staffing agencies have spent the last several quarters white-knuckling their operations amid a rough economy marked by an unprecedented candidate shortage and rapid shift in the job market. As a result, owners of staffing agencies find themselves exploring ways to cut expenses to protect their working capital. When looking at dwindling cash flow, delaying payroll may feel like an opportunity to make better short-term use of available funds.
Lack of cash flow isn’t the only factor influencing late payroll. The current economy means that finding trust-worthy experienced workers to manage payroll internally is difficult. Many business owners struggle to handle paying employees independently and may find that they inadvertently missed a payment cycle.
Missing Payroll Should Never Be an Option For Your Staffing Agency
Missing payroll is more than an inconvenience for your employees — it’s illegal and can bring significant consequences. The real impact of missing payroll includes:
- Potential Fees and Penalties
Not paying your employees can violate the Fair Labor Standards Act (FLSA) and could incur legal action, fees, and/or penalties for your staffing agency.
- Tax Implications
If your staffing agency isn’t doing payroll on time, likely, it’s not paying its payroll taxes on time. Missing payroll tax payments can also bring fees and penalties from the IRS. Beyond the penalty itself, you may also be charged with interest on the late payments as well. An additional 3-6% interest charge can quickly add up and further deplete current cash flow.
- Employee Livelihood and Morale
Unpaid employees are unhappy employees. Missing a payment cycle directly affects their ability to pay their own bills and could cause them to incur late payments and fees as a result. Additionally, disgruntled employees can have far-reaching consequences on your staffing agency. It’s hard to stay motivated without trust in the payment process. At best, you may find that internal employees and contractors alike are exhibiting lower morale, less productivity, and have a general indifference about their work. At worst, your workers may leave your staffing agency to find placement with a competitor.
- Distrust On Both Sides of The Hire
A lapse in the payroll process can disrupt your operations. And while it’s not surprising that missing payroll can create distrust with workers, many staffing agency owners don’t realize that not paying contractors can also create client doubt. Unpaid contractors can be vocal about not getting paid, which can cause concern with clients — especially clients who have already paid your invoices in a timely fashion.
Missing Payroll is a Key Indicator That Your Staffing Agency Needs a Back-Office Solution
Perhaps the biggest impact missing payroll has on your staffing agency? It’s a key indicator your business has challenges that extend beyond just the payroll process itself. Payroll inconsistencies influence a wide range of other operations within your staffing agency, including invoicing, HR functionality, onboarding, accurate reporting, and more. As a result, staffing agency owners quickly realize that implementing a payroll strategy alone is a mistake. Outsourcing their needs to a back-office solution provider is the only way to get their operations back on track.
The Back Office from Headcount Management Eliminates The Risk of Missing Payroll
If you’re struggling with consistently paying employees for your staffing company, Headcount Management’s The Back Office can help. Our full suite of back-office services and solutions manages the entire payroll process from onboarding to final check and everything in between. Schedule an appointment and learn more about leveraging The Back Office to ensure your workers never miss a payment cycle.