3 Payroll Lessons From Fyre Festival

Everyone knows about the ill-fated Fyre Festival. Simply put, it was supposed to be a massive festival in the Bahamas and the experience of a lifetime. Ticket holders would get the opportunity to sip margaritas and hit the pool with celebrities, supermodels, and artists. Long story short, none of that ever happened. People spent (and lost) a lot of money for what turned out to be a living nightmare. Seriously, look up the stories.

But before people arrived on the island to see their dreams dashed upon the Bahamian coast, festival staff had an inkling into the issues that would arise. How, might you ask? Payroll.

Take it from a payroll professional: This disaster could have been predicted. Here are the three payroll warning signs that would have exposed a flop like Fyre Fest before it was too late.

1. Irregular Pay Frequency

When you started your job, you should have been told how often you could expect to be paid. The most common pay schedule is biweekly, but many companies also choose weekly or semimonthly. The frequency an employee must be paid is partly determined by state payday laws. While companies can pay more often than their state's required frequency, most jurisdictions still provide a minimum expectation.

With that in mind, the first red flag for festival employees would have been not receiving a paycheck on payday. Any sudden change in pay frequency points to there likely being some kind of issue behind the scenes. Fyre’s offices started missing payroll months before the actual event was scheduled.

Note that if there's a problem outside of an employer’s control (like a banking issue or natural disaster), a lapse isn't automatically cause for concern if it gets rectified quickly. Also, if you’re paid on a semimonthly schedule, remember that bank holidays and weekends often don't always allow for consistent pay dates. 

2. Cash Payments

While most people wouldn't complain if their employer handed them a bag of cash on payday, it should generally be a cause for concern. If you usually receive payments via direct deposit or a paper check, the expectation is that you will continue to be paid in that method. Both types of payment should also include a paystub that breaks down the arithmetic behind your net pay.

While most folks care about the bottom line, it’s important to make sure that the taxes that are taken from your paycheck are remitted on your behalf. This is especially true of both Social Security and Medicare taxes, which your employer is required to match, since that money is intended to be there for you in your twilight years. If an employer is having funding issues and just paying you with cash on hand—which is exactly what Fyre’s organizers did—this should be considered a red flag.

There are only a few circumstances where cash payments aren't problematic. For example, if an employee recently changed their bank account and the direct deposit failed, employers may opt to pay in cash or by check instead of waiting for the funds to be returned. In this instance, your employer is just using a different means of getting you the net pay you were owed. Even so, you should still receive a paystub explaining what was taxed and deducted from your pay. 

3. Missing Paystubs

One of the best things you can do as an employee is understand your paystub. These critical payday documents weren't provided to Fyre staff. Reading your paystub can help you spot legal variations to net pay such as reaching a wage base, working more or less hours, or maxing out a deduction. However, outside of those reasons, a deviation in the amount you're paid could be a red flag that your employer is having funding issues.

If you're paid a standard check of $2,000 and receive $1,600 after taxes and deductions, it should turn your head if you suddenly receive $1,000 on payday. In this specific example, the employer might not have had enough to fund the entire payroll and instead decided to shortchange some paychecks. No surprise here: Shortchanging employees is not an acceptable method to meet payroll.

When it comes to payroll, the minds behind Fyre Fest did just about everything wrong. But even with their issues with funding and money management, there were alternatives to shortchanging employees. Some employers handle these situations respectfully and understand the importance of their employees’ paychecks. 

Most companies in these circumstances will use one of two options for funding payrolls. First, they can take a short-term business loan if they expect this to be a one-off event.  As an alternative, they can add a small business line of credit if they expect to have slow customer payments trickling in for the foreseeable future. Both options allow companies to pay their employees on payday without issue.

No matter what, not paying employees is never an option. You work hard for your money and you deserve to have the confidence and comfort knowing that it will arrive consistently, by the same method, and in a predictable amount.