Navigating Salary Payments as an SME Owner in Tough Times
A Look at How to Manage SME Salaries Amid Economic Challenges: Strategies for Stability and Success
It's been a tough couple of weeks on Nigerian Twitter. Threads upon threads of employees calling out their bosses for defaulting on salaries have flooded the timeline. From big corporations to small businesses, no one seems spared. There is no hiding that not receiving your due payment for work done is outright inhumane.
As an SME owner myself, I can't help but feel that both sides are caught in this sticky situation. On one hand, I understand the frustration of employees who have bills to pay, families to feed, and lives to live. Not getting your salary on time can derail carefully laid plans and budgets. It's a demoralizing feeling that no one deserves.
However, I also know firsthand the struggles we business owners face in trying to keep our enterprises afloat, especially in this unforgiving economy. Dwindling sales, skyrocketing operation costs, and limited access to financing are a perfect storm that can easily capsize even the most prudent entrepreneur's finances.
No right-thinking business owner aims to ever be in a position where they intentionally stop or delay paying employees who make those dreams possible. This goes against every core principle of building a successful, ethical, and people-centred enterprise.
But sometimes, the wolf really is at the door. You're faced with the tough choice of either defaulting on salaries to keep the lights on for another month or shutting down completely and rendering everyone jobless. It's a lose-lose situation that, sadly, many of us have to grapple with.
That's not to excuse the utterly unacceptable cases of outright salary theft by some bad eggs. If you've willfully withheld wages with no plans to make your staffers whole, then you deserve all the dragging on the TL and more. There's no justification for such wickedness.
For us just trying to survive though, here are some tips that could help navigate the stormy waters of salary payments:
Open Communication:
The moment you sense an incoming cash crunch, loop your employees in. Explain the situation frankly and work out temporary payment plans you can both live with. Uncertainty breeds mistrust, so keep them in the know.
Prioritize Payments:
If you absolutely must default, get staff buy-in first on payment priorities based on individual needs. Getting team alignment prevents resentment and shows you value their circumstances. A concerted sacrifice is easier when everyone understands the rationale.
Get Lean:
Comb through your expenses, slash all non-essentials and direct those funds to salaries. It may be time to work on a very strict budget for a while. Look at Gokada, a Nigerian delivery service company—after the Lagos bike ban, they had to downsize but stretched what was left to pay the remaining staff.
Last Resort Loans:
As a final option, consider taking loans if it means meeting your salary obligations. Just make sure you can realistically repay before digging yourself into deeper debt. Many construction firms have used loans strategically during crunch periods to cover payroll. By carefully checking the terms of the loan and prudently using the funds, they were able to maintain financial stability while still meeting staff salary obligations.
Diversify Income:
Consider exploring additional income streams to bolster your revenue base. It could be the perfect opportunity to monetize that side hustle idea or identify new business opportunities. If you are a dry fish seller, you might want to consider adding a frozen foods side biz that will keep you afloat when supply issues hit your main trade. Diversifying reduces overreliance on one revenue source and provides a cash flow buffer when one area dries up.
Ultimately, consistent salary defaults are unsustainable for any business that wants to retain talent and remain operational. Exhaust all options make the tough decisions, but most importantly, keep your employees in the loop.
It's not an easy period to be an entrepreneur or an employee. But by maintaining open communication, exploring creative solutions and treating each other with empathy, we might be able to weather this storm together. The days ahead will remain turbulent, but a well-handled salary situation can be the life raft that keeps everyone afloat.
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Regards,
Ayo Bankole Akintujoye
Convener & Co-Founder.