Employees await their salaries with excitement and are rightly disappointed when they are not paid on time. Learn the top five reasons for late salary payments and how to address them.
Salary delays cause disappointment, frustration, and financial hardships in employees. The stress from financial hardships can adversely impact your employees’ morale and reduce productivity.
While some salary delays are foreseeable and, therefore, manageable with some planning, others—like those caused by glitches at a third-party payroll vendor—can completely surprise you.
Whether you foresaw or discovered it at the same time as your employees, late salary payments require careful management. If you handle them well and learn from them, the experience can improve your relationship with employees.
This article investigates the common reasons for salary payment delays and offers ways to address them professionally.
What are late salary payments?
Late salary payments happen when employees don’t receive their salaries at the end of a pay cycle. A pay cycle is a regularly scheduled time workers earn their pay. The end of a pay cycle triggers the start of another.
Workers must receive their pay when a pay cycle or pay period ends. Therefore, salaries are officially delayed if unpaid when another pay cycle starts.
Late salaries are illegal in Kenya and breach the employment contract. Employees can sue the employer for the payment of delayed wages and the stress and costs resulting from the late payment of salaries.
Most companies publish salary payment dates internally, and employees use these to mark their calendars and know which dates they will receive their salaries that financial year.
What are the main reasons for late salary payments in Kenya?
Salary delays can be caused by any of several issues. How well and quickly you solve them determines how costly they will be on productivity and your general relationship with employees.
You have every incentive to pay salaries on time, but sometimes salary delays are unavoidable. Here are some of the reasons salaries may be delayed:
1. Payroll processing issues.
Human errors and other payroll processing issues are the most common reasons salaries get paid late. Because of human error, some employees may get paid less or more than they should.
Human error can manifest in using wrong tax bands, failing to effect mandatory deductions, miscalculating hours worked, and disbursing salaries into the wrong accounts.
Correcting and rerunning payroll is wise if you catch some of these errors early. Otherwise, you may miss your payroll deadline. Communicating the impending salary delay to employees is crucial when you realise you cannot avoid it.
2. Cash flow challenges.
Businesses that rely on a few big clients for the bulk of their sales revenue will face cash flow challenges if any of those clients delay payment. The effect on cash flow has a ripple effect on the ability to meet obligations to suppliers.
While regrettable, you may delay salaries rather than not pay suppliers and risk failing to service customers and keep the business running.
3. Economic downturns.
All economies experience slowdowns caused by rising inflation, lack of credit, and unexpected global events like the recent Covid pandemic and the war in Ukraine.
When the national economy struggles, businesses inevitably suffer. They find it increasingly difficult to service loans and fund ongoing expenses. Many will prioritise paying essential costs rather than paying salaries on time.
4. Public holidays.
Public holidays should not usually cause payroll delays as they are published and known well in advance. However, the Cabinet Secretary of the Interior and National Administration in Kenya can declare a public holiday at any time if they see fit.
These holidays are outside the regular schedule, which makes them hard to plan for and may cause salary delays. Instances where a public holiday may be declared include after the death of an important person and the polling day during general elections.
5. Administrative hurdles at the bank.
Some salary delays are caused by factors beyond your control. These also usually happen without notice, leaving you powerless to do anything. A common instance is hurdles at your or an employee’s bank.
Unscheduled upgrades, network failures, and system malfunctions are some of the hurdles banks experience that may delay payment.
How to professionally deal with late salary payments (and avoid a repeat)
Salary delays are sometimes unpreventable. However, you can minimise their damage by the way you handle them.
Be transparent in how you communicate the salary delay with employees. Spell out how you intend to solve the delay, how long it will be before they access their pay, what has caused it, and how to ensure it does not happen again.
If you have to wait for employees to ask why their salaries are late, you are going about it the wrong way. Take control of the situation early so employees don’t have to speculate.
Employees are generally more understanding of salary delays at the bank because they know there is little you can do to prevent them.
However, you will face the challenge of constantly explaining late salary payments if they become the norm.
Consider upgrading your payroll processing and disbursement software.
When you frequently delay salaries, it should be a sign that you need to upgrade to another business payment provider. You should find a more reliable salary disbursement partner who can guarantee efficient and timely salary disbursement.
If you continue to experience processing errors, consider automating payroll, upgrading your payroll software, and training your payroll staff.
Growing businesses in Kenya trust Intasend for their salary disbursements and business payments. Our disbursement solution allows you to pay up to 5,000 employees with a single request. We support disbursements to bank accounts and mobile money wallets.
Try Intasend today and experience a faster and more cost-efficient way to disburse salaries and make bulk and scheduled business payments.
