How to Pay Staff When Cash Flow Is Tight

If you can’t cover payroll, act before payday. Work out the exact shortfall, talk to your staff early, and make paying wages your priority. If you need breathing space on PAYE, contact HMRC about Time to Pay. To cover a short-term gap, options include an overdraft, invoice finance or an unsecured working capital loan.

Key Takeaways:

If you’re struggling to pay staff – your cash flow might feel restricted.

You can give your cash flow a much needed boost with business credit or short term loans. Healthy cash flow = money to pay wages, bills and other expenses.

If things have been difficult for some time, you should avoid taking on any loans and instead consider whether this is a one off, or part of a deeper business problem.

Even if your business is profitable on paper, cash flow can become a problem when more money is going out than coming in. Employer National Insurance rates are a significant factor, sitting at an all-time high of 15% (updated October 2026), up from 13.8% since April 2025. In addition, wages, rent and supplier bills are all common examples of business expenses that, when combined with delayed payments or other unexpected costs, can cause cash flow to become tight.

Source: GOV.UK

If you’re struggling to meet payroll demands and cover other essential bills, it is essential that you ask yourself whether this is a one-off, short-term blip, or a deeper problem that you’ve been dealing with for months. If it’s a one off while you wait for a large payment to land, you can secure emergency funding to cover the interim. If it’s part of a bigger cash flow problem, you may need to seek advice from an insolvency practitioner.

Ran into cash flow problems? At this stage, it is essential to consider whether it is a temporary problem or if the business is in decline. Temporary cash flow issues can be solved with emergency funding, and a declining business can be saved with early action.

One-off cash flow problem vs insolvency: Which is it?

When it comes to solving cash flow issues, the right approach depends on whether it’s a one-off thing or a bigger financial problem.

Your cash flow troubles are likely to be a temporary one-off if:

You can point to one specific cause. Examples include a late customer payment, unexpected repair or seasonal dip.

The business remains profitable and is generating revenue.

You expect the situation to resolve within one or two payment cycles.

This is the first time you’ve run into this particular challenge.

If your cash flow challenges are a ‘one-off’, you’re in a good position to explore your business finance options.

Cash flow troubles point to a deeper solvency problem if:

You are regularly struggling to pay your bills on time.

You’re putting off one payment to make another.

Debts are growing faster than revenue.

You’ve missed payroll before, or you’re relying on personal funds to cover it.

What are my options if my business has been struggling for a while?

If you can’t pay your staff and haven’t been able to keep up with overheads and other bills for some time, it is possible that your business is insolvent. Don’t panic, though, as you’ll still have options. You should talk to a licensed insolvency practitioner who will walk you through the important steps and help you decide the best path forward.

What to do before payday when you can’t pay staff

If your cash flow is suffering a temporary blip which means you can’t pay your staff this month – don’t panic, you have options. Follow the suggested steps below to keep your staff informed, explore delayed payment options and free up any cash tied up in invoices or elsewhere.

Talk to staff:

Your priority should be to keep your staff informed. They will be relying on payday to cover their own personal bills, so it’s essential that you give them plenty of notice and present them with a clear plan and expected timeframe for them to receive wages owed.

Prioritise wages:

When chasing up and allocating funds within the business, make sure to prioritise paying the correct wages. Failing to pay someone’s wages is a criminal offence in the UK and you may also receive a notice of underpayment from HMRC if you do not meet National Minimum Wage.

Source: GOV.UK

HMRC Time to Pay for PAYE:

If you’re unable to pay the tax and Class 1B National Insurance due from your PAYE Settlement Agreement (PSA) by the deadline, you may be able to set up a payment plan to pay it in installments rather than in one big hit.

Source: GOV.UK

Chase invoices:

Your cash flow may be stifled due to unpaid invoices. Each year in the UK, 28% of businesses are affected by late payments, which can have a huge knock-on effect on being able to pay your staff. A good place to start when recouping funds is by politely but firmly chasing up unpaid invoices.

Source: GOV.UK

Pause non-essentials:

Eliminate any discretionary expenses, which means anything that is not strictly required to keep core operations running. This could include things like travel to client meetings when a video call will suffice, unused or duplicate digital tools that you pay a subscription for and any aesthetic upgrades that you can live without.

Ask suppliers for longer terms:

Strengthen your current cash flow position and be better equipped to pay staff wages by extending your supplier terms. Negotiate more time to pay with your suppliers in order to retain funds for as long as possible until a big payment lands. If you’ve previously always made supplier payments on time, they may be willing to be flexible as a one-off.

What the law says: No money to pay staff

If you’re unable to make payroll, you might be considering your rights as an employer to reduce staff hours, halt work or downsize your workforce. However, you can only lay staff off without pay or put them on short-time working if:

Their contract allows it

It’s an agreed custom and practice

It’s part of a union or industry agreement

The employee agrees to the change

Otherwise, cutting hours or pay without agreement can lead to a tribunal claim.

ACAS Guidelines – Layoffs and Short-Time Working

Fix your temporary cash flow problems: Short-term funding & other options

Short-term cash flow problems can be solved with a quick injection of cash. If there are no underlying problems affecting your business’s profitability, and you’ll be able to make the repayments, you should consider the following options:

	How long does it take to get funds?	What costs does it involve?	Is security needed?	Best for…
Business credit cards & overdraft facilities	Anywhere from several minutes to up to 2 weeks.	Applicable interest fees. Typical business credit cards may also have annual fees.	No.	Smaller business purchases that you are able to repay each month.
Short-term loan (e.g. working capital loan)	Anywhere from 24 – 48 hours.	Interest fees and any arrangement charges.	No.	Urgent cash flow gaps such as repairs, purchasing stock or bridging revenue.
Asset-based funding	Anywhere from 24 hours to 4 weeks.	Annual interest rate and any set-up charges or fees.	Yes – ABL is a type of secured lending where your assets are used as collateral.	If you need a larger amount of money and have an asset-rich, cash-poor structure.
Supplier terms	You won’t receive funds outright, instead you’ll reach an agreement with your supplier to keep your funds for longer.	No costs.	No – although your supplier may request part payment rather than the full amount.	Businesses with a crippled cash flow who want to slow their outgoings.
HMRC Time to pay	You won’t receive any funds – but you’ll free up some cash by spreading the hit of your PAYE bill.	A TTP arrangement usually carries interest charges.	No.	Businesses who can’t pay their PAYE bill

Disclaimer: White Oak UK doesn’t offer business credit cards or overdraft facilities. We’ve included them so you can compare all the options available. Speak to your bank or card provider about these.

What funding can I get to cover payroll?

Short-term business financing is the best way to cover payroll expenses when your cash flow is tight or tied up elsewhere. There are many different types of short-term loans, but the best options for payroll expenses are working capital loans and invoice finance.

Invoice finance is good for covering payroll expenses when you’re waiting on client payments. It is a form of financing that uses the value of your unpaid invoices as collateral, unlocking up to 90% of their total amount almost instantly.

Working capital loans are another option for getting a fast injection of cash to cover payroll costs. With White Oak UK, working capital loans can be customised to your requirements, allowing you to borrow anything from £5,000 to £2 million on a 3-12 month term.

Where White Oak UK fits

White Oak UK provides unsecured working capital loans to established UK SMEs that need to pay staff and suppliers on time while money is temporarily tied up, for example in unpaid invoices or a slow month. You can borrow from £5k to £2m over 3 – 12 months. It suits a gap you can see the end of. Simply apply online or get in touch with us for a chat about what product is best suited to your business and any requirements you might have. If you’ve struggled to make payroll for several months, speak to an accountant or a licensed insolvency practitioner before borrowing.

How to stop this happening again: What are the warning signs of poor cash flow?

Knowing how to spot a potential cash flow issue before it grows is key to running a successful business. From failing to make payroll to being unable to pay suppliers, inconsistent cash flow can quickly snowball into a crisis. Before it gets to that point, you should be vigilant about any ‘red flags’ that might disrupt your finances. Explore these in our guide: 5 Signs You Need a Cashflow Loan.

FAQs

Is it illegal to not pay someone’s wages? Paying late is a breach of contract, which is illegal. Under Section 13 of the Employment Rights Act 1996, it is illegal to withhold, deduct from or fail to pay an employee’s wage.

How can I improve my cash flow position? The simple way to look at improving your cash flow is to reduce the speed, size and frequency of your outgoings and increase the amounts you have coming in.

Accelerate your inflows by:

Issuing invoices immediately after the provision of goods & services

Shorten customer payment terms

Offer discounts for early payments (e.g. 2% off if paid within X days)

Request upfront deposits for larger, one-off projects

Consider invoice finance if delayed payments are an issue

Get a working capital loan for an injection of cash to cover tricky interim periods

Reduce your outgoings by:

Negotiate extended payment terms with your suppliers where possible

Time your outgoings to occur after any earnings have landed

Lease equipment rather than buying it outright to protect cash reserves

Want to talk to our expert team about more ways to improve your cash flow position? Call us on 0333 014 9000.

Can I defer PAYE?

While you can’t directly defer PAYE on an ongoing basis, you can spread an existing or overdue PAYE bill by setting up a Time to Pay agreement with HMRC. You’ll pay interest on any outstanding balance until payment is made in full, but the overall bill will be split over monthly installments.

Next Steps: Cover your business costs

If cash flow is tight, act before the next payroll date. Start by identifying the cause: a delayed customer payment or seasonal dip may only require short-term support, while ongoing pressure to meet wages, rent and supplier bills needs a more considered plan. Review your cash position, chase outstanding invoices and speak to your team or any advisers early. For a temporary gap, invoice finance or a working capital loan could unlock the cash you need to pay staff on time. If the problem has persisted for several months, seek advice from a licensed insolvency practitioner before taking on further debt.

White Oak UK can help you explore flexible funding options for your business. Apply online or call 0333 014 9000 to speak with our team.