Unpaid salary

S

stromburg

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I've been working for a small startup company for 20 months or so now. The company began experiencing a deterioration in cashflow due to a lack of sales and lack of private capital investment during the spring of this year. The cashflow reduced to such a level that salary payments were initially paid late and ultimately missed altogether resulting in a backlog of salary amounts being owed to me and at least one other employee within the company.

I am now owed approx 4.5 months of salary. I checked with employment rights body and discussed the option of resigning due to breach of employer/employee contract , wage act which really means constructive dismissal because I am enduring conditions so far outside my terms of contract that I have no other option than to resign (or alternatively by staying I'd be somehow accepting these terms).

I know that my chances of being paid the backpay are slimmer than I would hope given that I think that the company is more likely to slide into insolvency at the moment than be rescued by some angel investor who could reflate the companies longer term prospects of surviving or at least getting off the runway.

Has anyone been in similar circumstances or can offer advice ?
 
Don't ever work for free.
I would start looking for paid employment ASAP.
 
Nobody is investing in startups right now unless its a slam-dunk guaranteed winner with bells on.
So if there are no pipeline sales then you need to get out in the market asap and find another job, this company is a goner.
What has the company's approach been on this? I presume it is a reasonably small outfit, so do you know has everybone been treated like this? Is there a firm of accountants that your company deals with - it may be worth contacting them directly.
One thing I would be concerned about is if the company have been so flippant in relation to your salary, have they been paying the appropriate PAYE and PRSI submissions to revenue on your behalf?
 
From your post it would appear that some employees are being paid but others are not, is this the case? Has management explained how they plan to resolve this inability to pay you?
 
The company is very small and I am the only non-director employee. When cashflow started to dry up I was (insofar as I can determine) given preference for salary over a peer employee who has director status - in his case he is more in arrears than I at this stage. We were paid partial salaries in between times with no change in contract but the amounts owed started to mount up with each successive month and false dawns regarding the company getting the capital injection it needed.

I think the most salient advice I am seeing from this post (which I already knew in my heart) is that startups with very tentative sales pipelines stand very little chance of getting a cash injection in the current environment.

Even if they have some sniff of a potential sales opportunity I would have imagined that a potential investor would be looking at a company which is in debt to key employees and I can't see how the company can service that debt using the investor(s) money. Maybe I am missing something?
How would company debt relating to unpaid salaries show up on the accounting books ? Is there some way that the employer could obscure this from potential investors and then be in hot water when it comes to repaying unpaid salaries because the investor, I assume, needs to be clear on how their investment is being availed of within the company.

Have I any rights as an employee to make inquiries with their accountants ? I would have assumed a lot of that info would be commercially sensitive even though I am an employee impacted by the lack of salary payments.

I have a P60 for 2007 tax year and all taxes were apparently correctly
deducted for 10+mths I worked in that year.

I've been paid so little this year and I've a fair idea that the employer has paid PRSI/PAYE for the little they have given me.
However, it is a good point and this employer has always paid by cheque which adds to the obscurity relating to tax deductions,etc.

Management has acknowledged that I have been patient above the call of duty and have offered equity in the company and have vowed to repay if and when the company becomes funded through either/both sales and capital injection.
 
Before going away and getting another job, sit down with the directors and explain that you will have to leave if they can not pay you your full salary. Find out if there is any decision regarding investment or sales pending in the coming days. If the directors really believe in the business, they may invest personal or family money.

If you are emotionally invested in this start-up, you could continue to work for them while looking for another job. If your profession is suited to short term contracting, you could try to get a 3 or 6 month contract elsewhere to give the directors time to acquire funds or make the necessary sales.
 
In the same situation as you now, not been paid and the owners are expecting finance. Will they get it who knows.
Its a very worrying time now, change now will require 3 hours of driving per day for work which is gonna be hard.
But thats what we have to get used to I suppose.
 
The rights commissioner ([broken link removed]) will be able to help you get back some of those wages. As far as I remember there is a fund set aside for people in your situation. I had to tap into it once myself!
 
Complainer said:
I thought this fund was for cases where the employer had actually gone bust?
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Yes. That fund is for employees of companies which have gone insolvent. I think if the company is still technically trading and they've not paid salaries then it has to go before a hearing (or set of hearings) with a rights commissioner. I know of an old friend who had a claim for a huge amount of unpaid salary and it took him the best part of 18 months to get judgement in his favour reached and the company frustrated the employee tribunals by appealing at every turn and failing to turn up despite appealing.
It is rather annoying that the employee can't call in their money like any other creditor can. I'm guessing it is setup this way to protect companies from the much smaller percentage of cases where a new contract between employee and employer may have been agreed and the claim by the employee is spurious or vexatious.
 
I assume that as its a small company, you know the directors well enought to talk to them on a personal level.

If I were you, I would explain to the directors that you are not able to survive on no salary and so have no option but to look for a new job. I would ask them if they will give you good references, which they should considering that you have stuck by them even though you are not being paid. I would tell them that if the company does get a funding injection and can pay the wages and arrears before you manage to find new employment, it would be your preference to return to work for them, but if you get a new job before this happens, then they'll just have to accept this and part on good terms.

If the company goes under, as an employee who is owed wages, you will become a preferential creditor along with the likes of Revenue. This means that when the company is liquidated, you will be more likely to get some of your wages arrears than a trade creditor. However, the likelihood is that there will be little money to pay anyone, so I wouldnt count on getting anything.
 
csirl said:
If I were you, I would explain to the directors that you are not able to survive on no salary and so have no option but to look for a new job. I would ask them if they will give you good references, which they should considering that you have stuck by them even though you are not being paid. I would tell them that if the company does get a funding injection and can pay the wages and arrears before you manage to find new employment, it would be your preference to return to work for them, but if you get a new job before this happens, then they'll just have to accept this and part on good terms.
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Your advice above looks good to me. It is a small enough company and I have started frank discussions about it. Actually the fact the company is so small and I am 50% of the technical staff that produce the output means that they are keenly aware that my continuation to work for them or not is a major risk factor in them securing the sales and the investment capital they desire to stay in business.

When you say "return to work" I assume it is implicit in what you are saying that I am justified in suspending work for them until the arrears issue is sorted out or quit if I get new employment sooner than they have settled the arrears. My dilemma at the moment is that any extra hours I work given the size of the arrears puts me in further risk of ratcheting up a larger amount of salary arrears. Even if they manage to scrape together 2 months work which they can pay me in advance on condition that I work those 2 months I think it is folly because by the end of those two months unless their financial situation has improved I'll still have the same 4-5 months of salary owed to me.
 
Just thinking out loud, but has the option of being officially being made redundant been discussed with them - at least you'll be able to claim the dole while seeking new employment.

I myself would probably ask to be laid off so I could claim the dole and spend my time seeking new employment. If circumstances change, they can always rehire you at a later date if you are still available.
 
On a slightly different topic, it would be a good idea to check with your Tax Office that all tax deductions have been passed on. I was caught in a situation once where a company, although in financial trouble, did pay me my wages with all the correct deductions for PAYE/PRSI made but were not passing them on to Revenue. I eventually contacted Revenue who carried out an audit of the company and I was credited with the payments.
 
Just an update on this with our situation, the unpaid stretch has been pushed for another 3 weeks as the funding is still no here.
But we did get pay slips which is odd, since we were not paid. Or is it odd!!!
 
yop said:
Just an update on this with our situation, the unpaid stretch has been pushed for another 3 weeks as the funding is still no here.
But we did get pay slips which is odd, since we were not paid. Or is it odd!!!
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Did the pay slip show a zero amount?
 
yop said:
Just an update on this with our situation, the unpaid stretch has been pushed for another 3 weeks as the funding is still no here.
But we did get pay slips which is odd, since we were not paid. Or is it odd!!!
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It is very odd indeed. Did you ask explicitly why you got the pay slip and no pay?

What is to stop your employer saying - 'look, I paid you, you have the pay slip and you accepted it'. You are funding this company with your work and if they are not paying you, they are not paying PRSI. When it all hits the fan, will you even be entitled to job seeker's allowance (or benefit, whichever is based on PRSI)?

In your shoes, I'd be job hunting like crazy.
 
We didnt take much heed of it really until we started to think about it, could hardly be that sly!!!!
 
yop said:
We didnt take much heed of it really until we started to think about it, could hardly be that sly!!!!
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Not much heed? The mind boggles!

Now that you thought about it, do ask the question at least. Companies in financial difficulties are often too stretched to worry about niceties.
 
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