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Ask HN: What to do when your company misses payroll?

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Re: Ask HN: What to do when your company misses payroll?

#21

Post by uptown »

brk wrote: post #20
uptown wrote: post #16

Aside from payroll, your company is likely facing massive amounts of debt to their creditors. While you may have an emotional connection to the company, bill collectors acting on behalf those with outstanding invoices with your company will have no such connection. There's likely a backlog of unpaid invoices that will also need to be paid. Employees walk ... creditors sue. Your company will pay creditors first, and i…

No, legally, the employees get paid first.

I've seen first-hand that companies don't always do this.

Perhaps once a company files bankruptcy there's more oversight with this ... but before that happens, I've absolutely seen a company trying to cover its ass and limit its legal expenses by closing out unpaid invoices and stiffing their staff.

Re: Ask HN: What to do when your company misses payroll?

#22

Post by brk »

The problem is that this situation creates a death spiral for the company. If they are missing payroll they are literally out of money. Any investor willing to put money in is going to do their due diligence. This means the investor is going to be aware of just how badly the company needs this investment, which typically leads to the terms being very unfavorable, which typically leads to your equity being very unvaluable.

So, without knowing more about the specifics at this point, I would say that you are working for free, and unlikely to have any stock options you have ever amount to anything of value.

Everyone has their own reasons, but one of the reasons I work for startups is because of the equity. When the future value of the equity is at or near zero, it's no longer an interesting or worthwhile proposition for me.

You should have a good enough feel for the pulse of the company to know if there if you are close enough to sustainability that maybe a little extra cash will get you across the finish line, or just delay the inevitable. My guess though is that it is time to start looking.

Re: Ask HN: What to do when your company misses payroll?

#23

Post by edw519 »

brk wrote: post #20
uptown wrote: post #16

Aside from payroll, your company is likely facing massive amounts of debt to their creditors. While you may have an emotional connection to the company, bill collectors acting on behalf those with outstanding invoices with your company will have no such connection. There's likely a backlog of unpaid invoices that will also need to be paid. Employees walk ... creditors sue. Your company will pay creditors first, and i…

No, legally, the employees get paid first.

+another if I could.

It's really important to understand this. If you, as an employee, are not getting paid, then it's a pretty safe bet that no one is getting paid. You are just now finding out what the creditors have been dealing with for months. Missing payroll is deadly fucking serious. Get out now.

Re: Ask HN: What to do when your company misses payroll?

#24

Post by brk »

uptown wrote: post #21
brk wrote: post #20

Earlier quoted context omitted.

No, legally, the employees get paid first.

I've seen first-hand that companies don't always do this. Perhaps once a company files bankruptcy there's more oversight with this ... but before that happens, I've absolutely seen a company trying to cover its ass and limit its legal expenses by closing out unpaid invoices and stiffing their staff.

Yes, there is much more oversight with formal bankruptcy proceedings.

Anything is possible, and from what the OP describes, the highest likelihood is that there is no cash to pay ANYONE.

Re: Ask HN: What to do when your company misses payroll?

#25

Post by russell »

edw519 wrote: post #17
russell wrote: post #5

Earlier quoted context omitted.

Likewise here. If the company had any prospects of funding, they would be more open. Get your resume out now. There is no harm in working for a while longer, so long as it doesn't interfere with your job search. Also check with you state employment office, because you probably have wage claims which may go ahead of other creditors. (IANAL) EDIT: Your coworkers are still working because they dont know what else to do.…

"Your coworkers are still working because they dont know what else to do." Email every one of them the link to this discussion. Give them a chance to "know what else to do".

Bad advice. Dont burn your bridges. You may need recommendations from your boss or he could sue out of spite.

WRT your coworkers, I was thinking of stories of people would get ready for work every day, go sit on a park bench until quitting time, and go back home, because they couldnt face the fact that all the meaning in life was gone. People have a hard time dealing with major setbacks like death, divorce, or loss of their job.

Re: Ask HN: What to do when your company misses payroll?

#26

Post by philwelch »

brk wrote: post #20
uptown wrote: post #16

Aside from payroll, your company is likely facing massive amounts of debt to their creditors. While you may have an emotional connection to the company, bill collectors acting on behalf those with outstanding invoices with your company will have no such connection. There's likely a backlog of unpaid invoices that will also need to be paid. Employees walk ... creditors sue. Your company will pay creditors first, and i…

No, legally, the employees get paid first.

Yes but it's not automatic. Creditors don't have any feelings of loyalty towards debtors the way employees feel towards employers. Creditors also tend to be businesses who are used to suing for their debts, unlike employees. So while employees should get paid first, you have to actually make a claim to that money somehow. I'd ask a real lawyer for the details.

Re: Ask HN: What to do when your company misses payroll?

#27

Post by mrbgty »

tjic wrote: post #7

There's a lot of good advice here telling the employee how to act. I concur with most of it. Let me add something from another perspective: Speaking as a startup owner who has had money problems from time to time: a) crap happens b) your hourly people, who have no equity, deserve every single cent. Whether answering phones, stuffing boxes, or whatever, these people work hard, and you MUST pay them every penny, on the…

This list is awesome. I would love to work for someone like you.

My experience has been that even when the leader/ceo/whatever decides to cut their own pay in that situation, it is done in some sneaky way that doesn't really result in much loss to their overall pay.

Re: Ask HN: What to do when your company misses payroll?

#28

Post by olefoo »

One thing that you should do is network with your soon to be former coworkers. Set up a mailing list, start talking about what is happening and help each other find jobs. I've had to do this once or twice, though never at a place that outright missed payroll. But be prepared for the fact that most of your coworkers are in denial.

Depending on the state you are in it may be that management broke the law. Generally speaking, if you can't make payroll you are supposed to dissolve the business then and there and pay employees by selling the assets of the company.

And yeah, if management didn't even have the cojones to tell you that there wouldn't be paychecks on payday, the place is doomed and there is no helping it.

Good luck.

Re: Ask HN: What to do when your company misses payroll?

#29

Post by edw519 »

russell wrote: post #25
edw519 wrote: post #17

Earlier quoted context omitted.

"Your coworkers are still working because they dont know what else to do." Email every one of them the link to this discussion. Give them a chance to "know what else to do".

Bad advice. Dont burn your bridges. You may need recommendations from your boss or he could sue out of spite. WRT your coworkers, I was thinking of stories of people would get ready for work every day, go sit on a park bench until quitting time, and go back home, because they couldnt face the fact that all the meaning in life was gone. People have a hard time dealing with major setbacks like death, divorce, or loss o…

I disagree that this is bad advice. Perhaps I didn't make myself clear enough.

You are in a time warp. This game is over. It was over long before OP posted here.

You are on a sinking ship and must jump. Your co-workers are in the same boat. Some may even say you have a moral responsibility to help them. In real world disasters, some risk their lives to help others escape. Sending this link to your co-workers could greatly benefit them while costing you nothing.

You have no bridge to burn. Your boss already burnt it. Any recommendation from someone who let this happen to his people is worthless.

I don't blame your boss for having business problems. That can happen to anyone. I do blame him for letting it reach the point where it would affect his employees without fair warning. This is inexcusible and unacceptable.

From a practical point of view, you are much more likely to get a good reference from helping out a co-worker than from a boss who has already screwed you. So do it.

Re: Ask HN: What to do when your company misses payroll?

#30

Post by alekseyt »

I have been in this situation. The employees were told the expected round of financing hadn't come through yet and we had enough money to pay rent, or pay the employees.

Some (few) people left straight away. Most stayed on and tried to make a go of it (this was a start-up). I had to drop out after a few weeks due to falling behind on my own personal finances.

If I was in such a situation again, I would leave immediately and save some heartache.

Good luck!

P.S. The company survived and is still around but it never did make it big.

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