A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
I can't afford to pay my staff their wages - what should I do?
A payroll the company can't cover is the sharpest crisis in business - it has a date, it has names, and it forces the viability question that everything else allowed you to defer; the good news is that there are right moves in that week, and staff are far better protected than most directors realise.
In this guide you'll learn the immediate options before payday, the mistakes that make things worse, how employees are protected if the company can't continue, and what the situation means for you as a director.
If payday is days away and the money isn't there, it's a good idea to treat this page as the prompt to take advice today - the options below shrink in order as the date approaches.
First: is this a timing problem or a viability problem?
A timing problem - a large invoice landing days after payroll, a seasonal dip with a clear recovery - can legitimately be bridged: chasing debtors hard, invoice finance against the ledger, a short deferral agreed with the bank, or a director loan made with eyes open.
A viability problem - payroll uncovered because the business no longer generates enough, with HMRC arrears and stretched suppliers alongside - cannot be bridged, only deferred at growing cost; the warning signs guide helps make that call honestly.
The distinction matters legally as well as practically: bridging a genuine timing gap is good management, while borrowing or taking deposits to fund payroll in a business you doubt can recover walks into wrongful trading territory.
The options before payday
Talk to staff early and honestly - a short, explained delay handled with respect keeps teams; a silent missed payday destroys them, and often the business with it.
Part-pay evenly rather than paying some in full - even-handedness matters to morale and, if the company later fails, to the conduct review.
Free up cash fast: debtor calls, invoice finance, agreeing brief supplier deferrals - while being honest that these help a timing problem and merely postpone a viability one.
And take advice before payday, not after - because if the honest answer is that the company can't continue, the timing of what follows determines how quickly staff get paid, as below.
What not to do
Don't use the VAT and PAYE money - deductions are HMRC's money in trust, and funding wages from them starts a clock that ends badly.
Don't take new deposits or credit you doubt the company can honour to cover payroll - that's the textbook wrongful trading fact pattern.
Don't quietly pay the staff members who shout loudest or the ones you've personally guaranteed obligations to - selective payments on the brink become preferences.
And don't go dark on the team - every liquidator has seen the version where silence turned a rescuable situation into walkouts, grievances, and collapse.
How are staff protected if the company can't continue?
Better than most directors fear, and faster through a voluntary process.
If the company enters a Creditors' Voluntary Liquidation, employees claim unpaid wages, notice, holiday, and redundancy from the government's Redundancy Payments Service - typically paid within weeks - as our employees in liquidation guide sets out in full.
That safety net is precisely why struggling on unpaid for months "for the staff's sake" is usually backwards: an orderly liquidation gets people paid through the scheme in weeks, while months of hope-based trading just grows the arrears the scheme has to cap.
Directors who genuinely worked as employees may claim through the same scheme themselves.
Where does this leave you as a director?
Unpaid wages are a company debt, not automatically yours - the personal liability rules apply as elsewhere, and a director who acted promptly and even-handedly when payroll failed reads exactly that way in any later review.
The single decision that most shapes everything - staff outcomes, creditor losses, your own position - is how quickly the viability question gets answered honestly once payroll fails; our guide to your options when insolvent maps what follows either answer.
If payroll is at risk, call our licensed insolvency practitioners in Manchester today on 0333 023 5090 - same-day, confidential, and directly with an ICAEW-licensed IP who has sat with this exact week many times.
InsolvencySupport.co.uk is operated by Xeinadin Corporate Recovery Limited (company no. 11415156), 8th Floor, 100 Barbirolli Square, Manchester M2 3BD. Our insolvency practitioners are licensed and regulated by the ICAEW.
This article is intended for general information purposes only and does not constitute financial, legal, or employment advice. Always take advice from a licensed insolvency practitioner about your specific position.
Reviewed by Alan Fallows, Licensed Insolvency Practitioner, ICAEW.