Paying Promptly - Aren't We Legally and Morally Obligated?

Paying Promptly: Aren’t We Legally and Morally Obligated?

Paying Promptly - Aren't We Legally and Morally Obligated?Just about everyone—individuals and businesses—is struggling with cash flow. They just don’t have money on hand, which means it’s difficult if not impossible for them to pay their bills.

Rents are going unpaid. Vendors are waiting past the usual net 10- or net 30-day payment deadline on invoices.

Here’s my take on this: If those who could pay on time did so, more cash would be available for recipients to pay others. There’s a domino effect in the economy; money can’t circulate if those who depend on receiving it just aren’t.

Here are some payment-related issues that have arisen lately.

Big business isn’t paying small business on time

One of the biggest challenges for small businesses, even in good times, is solid cash flow. Small businesses may make sales but don’t always collect on time or in full. It’s estimated that small businesses are owed $900 billion from big businesses.

I recall the story of one clothing designer who sold to a major department store on terms of net 30 days. The store typically waited 60 days, 90 days, or more to pay, on the theory that the designer needed the store more than the store needed the designer. That’s some attitude!

Join the PayToday movement to urge big businesses to pay what they owe to small businesses at #paytoday.

Paying before payday

That’s what Domino’s is doing for its workers. It’s partnered with Branch so that pizza makers and delivery drivers can use an app to receive their wages, tips, and mileage reimbursements immediately (end of each daily shift). Pretty cool.

Federal and state laws

It’s a violation of the federal Fair Labor Standards Act (FSLA) to not pay employees on time. This law specifically focuses on non-exempt employees subject to minimum wage rules.

There may be state-level rules that also mandate employees be paid on time. These rules apply to those who are still working for you; different rules apply to final paychecks for employees who are laid off or furloughed.

Final thought

Martin Luther King, Jr. said:   “The time is always right to do what is right.”

Failing to pay your employees as promptly as possible not only violates the law in many cases; it is just the wrong thing to do.

Let’s hope that the second round of funding for PPP loans can help struggling small businesses pay their employees, their rent, and their utilities…and stay in business.

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