The company cannot pay wages: director checklist

Not being able to pay wages is one of the clearest signs a company is cash-flow insolvent, and it changes your duties as a director: from that point you must put creditors' interests first, stop taking on liabilities you doubt the company can honour, and get advice from a Licensed Insolvency Practitioner within days, not months. Continuing to run up debts past the point of no return is wrongful trading and can make you personally liable. If the company does enter formal insolvency, your employees are not abandoned (see what they can claim, below), and directors who are genuine employees may have a claim of their own. Work the checklist below in order. This is information, not advice. gov.uk, your rights if your employer is insolvent (accessed 27 July 2026)

Today

• Write down the exact position: cash at bank, wages due and when, other payments due in the next 14 days (HMRC, rent, key suppliers).
• Run the insolvency tests with our insolvency test tool. Unable to pay debts as they fall due means cash-flow insolvent.
• Check your personal exposure with the wrongful trading checker before taking on any new liability.
• Do not take customer deposits or new credit you doubt the company can honour.
• Book a call with a Licensed Insolvency Practitioner. Missing payroll is the point at which advice stops being optional.

This week

• Tell employees the truth about the delay, factually and briefly. Silence breeds panic; false promises are worse.
• Do not selectively pay some creditors, or repay director loans, while wages and HMRC go unpaid. In a later liquidation such payments can be challenged.
• Decide honestly whether this is a one-off timing gap (a late receipt due within days) or structural (losses every month).
• If rescue looks realistic, ask the IP about a CVA, administration or funding. If not, ask about a creditors' voluntary liquidation.
• Minute every decision from today onwards: board minutes template.

What employees can claim if the company enters formal insolvency

Employees of an insolvent employer can apply to the government for: a redundancy payment, holiday pay, outstanding payments such as unpaid wages, overtime and commission, and statutory notice pay. Applications are made online at gov.uk/claim-redundancy and need the CN case reference number issued by the insolvency practitioner or official receiver; gov.uk is blunt that you cannot claim without it. Claims for redundancy, wages and holiday must be made within 6 months of dismissal, and statutory notice pay uses a separate LN reference sent after the notice period would have ended. The Redundancy Payments Service helpline is 0330 331 0020.

Your own position

If you are on payroll under a contract of employment, you may have a redundancy claim of your own: run the director redundancy calculator. And read the fuller guide to what to do when you cannot pay staff wages.

Sources: gov.uk, your rights if your employer is insolvent (accessed 27 July 2026) and Insolvency Act 1986, s.214. This page is general information, not legal, employment or insolvency advice, and nothing here is a recommendation to continue trading while insolvent. Speak to a Licensed Insolvency Practitioner about your own situation.

Cannot pay wages: common questions

If the company goes into liquidation, do my employees lose their unpaid wages?

Not entirely. They can claim unpaid wages, holiday pay, redundancy and notice pay from the government's Redundancy Payments Service, using the CN case number the insolvency practitioner or official receiver issues. The full list, deadlines and helpline are in the section above.

Can I keep trading while I sort the wages problem out?

That is exactly the question to put to a Licensed Insolvency Practitioner this week, not one to answer alone. Continuing to trade and run up new debts after the point where insolvent liquidation was unavoidable is wrongful trading under s.214 of the Insolvency Act 1986 and can make directors personally liable. Run the wrongful trading checker, stop taking on liabilities you doubt the company can honour, and get advice before deciding anything about trading.

Should I pay wages from my own pocket?

It is your money and staff loyalty is real, but understand what you are doing: if you later reclaim it from the company you become one more creditor of an insolvent company, with no special priority. If a winding-up petition has already been presented, payments out of company funds carry their own risk of being void under s.127. Take advice before putting personal money in; the RPS safety net exists precisely so employees are not dependent on the director's savings.

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