Financial Issues In Company

Good Day,
I'm heading the HR Department of an IT company and for the past 3 years we have been facing severe financial issues, initially due to internal conflicts between investors and then later in the past year due to the recession in US. The headquarters of the company is based in the US with sales offices in London and Singapore. The development unit is based in Pune with project level management being handled in Chennai. Both the India offices have been struggling to pay salaries for the past year.

We have tried our best to keep afloat by putting into implementation a lot of strategical and change in management practices. Currently we have 3 live projects from which we generate income, only one project pays on time, the second is running into 3-4 months of delay and the third is a small-sized venture that generates low income. All the revenue is remitted to us via international wire. No income is generated in the India office.

The biggest and most critical issue we are facing is payment of salaries to our employees.
Team A works on the Project 1, that pays on time.
Team B works on Project 2, that is running in 2 months delay.
Team C works on Project 3, that generates low income.

All projects are major clients and big names but they are also struggling to some extent with their businesses and finances.

Based on the 3 year struggle and study, the Management had decided to pay Team A on time, the balance funds from this project is distributed for the remaining teams and to manage running cost. Needless to say that we are not able to pay teams B and C on time and they are currently running in 2 months delay, depending on the funds received from their projects. We were initially paying the entire staff 1/2 months salary from the collective income received but this raised a lot of discontent with Team A who unfortunately raised the issue the client and demanded that they be paid on time, plus we were unable to manage the running costs of the company. In the interest of maintaining this delicate balance the management along with the department heads in both the office have forgone their salaries for the past 7 months. I myself have not taken my dues and salaries for the past 4 months!

I have been with this company for the past 8 years and although there has been a lot of struggle and achievements, we have tried always our best to think about the company and employees. Understandably employees of Team B and C are extremely frustrated, even though we are blessed with 80% of the staff that stands in support of the company and are loyal and hardworking, there are definitely a few who find it very difficult to manage.

My plea is anyone who had the patience to read my post, to tell me how to handle the employees (in India only) who have threatened to file cases against the company by falsely accusing the management of refusing to pay them their salaries. On behalf of the management I have had collective and individual meetings with the staff in both Pune and Chennai and have clearly communicated to them that the company isn't refusing to pay but that they are unable to pay them because of the choked revenue streams. As and when the funds are received, they will be and are paid. But as is the unfortunate nature of certain individuals, few employees have ganged up and posted defamatory and insulting posts online on various websites and forums against the company, some have gone to the extent of stating some of the managers (both in India and US) by their names, residence address and cell phone information. The management here have received threatening phone calls too and our corporate website has been repeatedly hacked. These employees have also issued email propaganda within the office inciting other employees to revolt. Our chairman was most shocked and upset by these acts as this hurts the company terribly and all our hard work in re-building the company will be laid to waste if our name is dirtied so publicly.

I am trying my best to speak to the management and hold off on any legal action against these Indian employees as they may retaliate violently and try to sabotage our operations. We have proof of the employees by name who posted the defamatory remarks but only conjecture on those that placed the offensive phone calls.

I need some guidance as this is beyond my level of experience and knowledge. Can we take disciplinary action against these employees, in what capacity as they are indeed right in demanding salaries. Can we issue a notice stating that the company isn't refusing to pay but is unable to pay and will definitely pay all pending salary in due time? Please tell me what else can be done to handle this sensitive issue.

Any help or feedback or suggestion or action will be MORE than welcome.

Thank you for reading my long post.

Vani Srikant

Can I ask if any of the managerial team are forgoing their salaries? Are any of them facing angry landlords because they can't afford to pay the rent?

You should discuss the issue with the Management abroad so that they arrange to clear the salaries till this month as this is festival season in India and if the employees take the legal recourse or take some actions that may harm the operations of the Company, it would be a serious affair under Indian laws and they may not be able to handle it.
If the employees get their salary around Diwali, they would be happy and cool down.
Hope this helps you.

Sparky,
If you had read my post in its entirety you would have come across this line, "In the interest of maintaining this delicate balance the management along with the department heads in both the office have forgone their salaries for the past 7 months." Therefore, to answer your question, yes the management are in fact not just facing angry landlords and lapsed insurances among other difficulties. I don't understand the nature of your question. Do only employees face hardships? I used to be an employee as well before I was promoted to managerial post. I understand both sides and how hard it is for both the staff and their managers to deal with such difficult times. Would it make you feel better knowing that our branch manager in Chennai is under-going divorce because he was so involved in resolving the company's problems he didn't have time for his family?

I'm sorry if this sounds harsh, but I have been looking for answers and resolution on this and many other avenues as well and all I see is if the employee is suffering then its a huge deal, and everyone assumes all managers and directors are always evil.

I would appreciate if you have something concrete to say, instead of wanting to know who is suffering the most. I want to help both the staff and the company. They both need each other to grow.

Vani Srikant

Thank you Avika.
We are always in constant talks with the US office and yes they are trying to wire us enough funds to clear at least couple of months salary before Diwali. Things do look positive in that regards and I'm hopeful this will help cool things down.

But I wanted immediate help in handling the matter where employees have posted defamatory remarks online and are threatening to file cases against the Company and management falsely accusing them of refusal to pay salaries. Should we ignore these threats and defamation? But I do not wish for other employees to think that they can behave any way they see fit with no thought to consequences. These actions hurt both the staff and the company. These actions have been noted by our clients as well and they may pull out their projects believing India to be an unstable partner for their offshore needs. The company may shut down after all. How will that help rest of the employees who have not resorted to such means, who want to continue working, when they find themselves out of a job because of these unthoughtful actions by their fellow peers? Is it ok for employees to behave in such manner by threatening and hacking websites instead of helping the company generate revenue?

I would sincerely appreciate your feedback.

Vani Srikant

I believe you must have tried talking to such employees and requested them to desist from such defamatory actions.
I think you can call all the employees for a meeting and put across the point that some people amongst them are trying to create nuisance and the same has been noted by the clients also which may hurt the business and it may create a situation wherein the clients would pull out and they may not even get the money they are getting now. Further, it may lead to closing down of the Company that would not be in the interest of anybody.
Further, if you think appropriate, you can share the sufferings of the management personnel who have not got salary for last 7 months or so to put across the message that the senior managers are also suffering like them.
I think this would put pressure on the employees causing nonsense. The other employees would tell them to stop it as it may leave all of them jobless.
Hope this can help

Dear Vani,

The situation is clear to the employees. You have explained about what is happening.

Please make sure that this discussion has been acknowledged by them, i.e - a proof that this has already been discussed and the employees are aware of the current situation *(This is becuase, when they raise a claim that they are not being paid and demand leagal action - you can clearly state your side.)

The employees can also be informed that they are not being forced to stay there, and they can look out for opportunities (Obviously we cant ask them to stay when the salary is not being paid - but help them know where the company is heading towards"

As far as posting information about the company is concerned, please note that legal action can be taken against the person who is doing this which will cost him / her a) a Blackmark in his career reference data b) Monetary penalty c) please check this statement: I believe that such an attempt to spoil a company's reputation can even lead to investigation and jail punishment under the cyber laws. Kindly refer these much before you present this information to them.

Please tell them - when someone does not perform well, or has violated any code, the company does not go about publishing the individuals details and crime commited. Same way - what is it that makes them spoil the image of the company?

Dear Vani,

I am sure you must have different levels of talk with the management as well as staff. But what I believe is if you can call up team wise meeting and discuss openly about the matter it will help you and the employees to understand the issue better. First show your genuine grief and concern for the matter, then show a clear picture of the company's helth and finally ask them for solutions. Take down all the responses or tell them to write it. From this you will get to know how many are thinking from organizational point of view.

If you find the output of the meeting with 3 teams is not satisfactory, give them a specific month or date (tentative) for the release of their salary (if not whole then part of it). This way you can win the trust of the employees as keep them working for you.

If this even not work, threaten them of lay off (before this you must have your management's approval as well as the junk resources list). See, not paying the salaries in time is not a very serious offence if its one or twice, but not paying at all for a continuous period leads to a very very unhelthy state of affairs. If they go for legal help it would be a win-lose situation for the management.

Finally, you can find out people who are creating problems (problem child). Keep them away from other staff. Change their shift, or make them sit in distant places (I know you may be thinking that in this tech era how it will help they can even interact), but the point is you are making them know that management knows who are the problem creaters and in this way you are also making others aware that these are pessimists.

I am sure this is just a passing phase. If you company had servived for last 8 years then this small phase of 7 months or 2 yrs can't really take it to a closure. Try to find more projects. Now that the World bank has declared that we are out of recession, definitely the market will be up. Infact it has already shown signs of growth. Hence, it a matter of another quarter or two.

Regards,

Dev.

Dear Vani,
Army marches on its stomach (C'est la soupe qui fait le soldat) said the Napoleon. What is applicable to army is very much applicable to employees of some company as well.
Situations of this kind happen when management does not keep adequate working capital with them.
Your company is operational since 8 years. Most of IT companies were cash rich companies. Then where the cash has gone?
At this stage your management need to borrow the money and disburse the salary first. If any of the employee approaches the labour officer, your management will be in the yet another soup.
Secondly, investigate why project B is lagging behind. Tell that team to complete the project as per schedule. This will give enhance your cash flow.
Ok...
Dinesh V Divekar

Thank you for your responses.

Ash-
We only document MOM for project related discussions. For Management to staff related discussions only a memo is sent out outlining the time and agenda. I will start another process where a MOM of sorts is sent out after these discussions as well to document what issues were addressed. We have spoken to the staff about being free to leave if they feel this company is not suitable for their career paths. Few have taken the advice seriously, few as I said before are willing to stick it out with us. We are in no way holding them back and making them work under duress. But quite obviously the market few months back was in no position to encourage employees to seek better opportunities.

You have brought up an excellent point that managements never think of, that when employees perform poorly and drop balls on the projects, which does cost the company revenue, time etc. most companies do not go about blacklisting them, or extracting revenge by ruining their careers. I’m sure there is another side to that as well, but I haven’t seen it in my 8 years in this company.

Dev-
I agree that the environment now is very unhealthy and the delay in salaries has really twisted the nature of things in the company. Thank you for your words of encouragement. We haven’t decided to lay off any staff member so far, unless they wish to leave on their own, we welcome their decision to stay back. But with the state of affairs as they are, the Management is currently debating seriously on laying off some of the staff to cut back on our costs.

I do have a question on the legality of the employees approaching legal help. If the company is not doing well financially, due to certain specific reasons, and is trying to mend those gaps to get back on track, during this phase they are unable to keep the flow of payments and fall behind, but are not refusing to pay, when the employees approach for legal help, what course of action will be taken? If we had been refusing to pay it would make sense to demand legal intervention, but what will the law have us do when we are clearly stating that we need time to build back on. Would appreciate feedback.

Dinesh-
All the points (including the clever Napolean quote) are valid indeed. But as I have already laboriously stated in my really long post that we had investor related issues and then the recession hit us (the details of which and what I cannot of course discuss on an open forum, plus I doubt many of you here would even read it). Keeping enough working capital sounds incredibly sensible, yet many companies are exactly in the same position as my company, because there have been so many circumstances where both the company and the clients they cater to fell prey to an unstable market which reverberated into a domino effect across the globe. I’m sure if you are reading the news for the past year, you will know where most of the cash went.

It isn’t that simple to just instruct Team B to “complete” the project and things will get back on track. I understand that would be the most logical thing to do, and yes the Team Leads for Team B are in fact investigating and taking measures to fix it. But the problems are also at the client end and his funding.

We are currently managing on loans but too much of that is sure a shot way of shutting the gates on this whole operation. And no we did not receive any bail-out money from the US government. Disbursal of pending salaries is definitely the top priority for the management. And since you have raised the point of employees approaching a Labour Officer as well, I would really like to know your response to the question I have posed for Dev.

Thank you all again for responding. It certainly helps me to read your views and understand the perspective on certain issues as I have been battling this for so long that I feel I have exhausted my avenues.

Vani