Frozen Accounts, Delays in Salary Disbursement: What's Happening with Salarium?

Salarium, a financial technology company primarily providing payroll solutions for other companies, has suspended operations “indefinitely” in the Philippines following months of angry complaints from frustrated customers unable to access and disburse funds in its system. 

In a statement emailed to clients that has since been shared on social media, Salarium said the suspension of its operations beginning December 31, 2023 was caused by issues that have affected its ability to continue operating effectively. It said that “an incident” that occurred last December 18 had yet to be resolved and the company had no timeline when the issues could be fixed. It did not elaborate on the specific nature of the incident.

“Due to the lack of operational staff, all customer data shall be deleted from the databases and will be inaccessible during this time,” the statement added. “We sincerely apologize for the inconvenience this is causing you and thank you for your support over the years.”

There was no immediate information from the company about the money that its clients say they could not access and whether this would eventually be returned.

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Customer complaints vs Salarium

Since August 2023, Salarium’s clients have taken to social media like Facebook, X (formerly Twitter), and Reddit to air their frustrations about the startup. Most of the complaints focused mainly on clients' inability to access funds after the platform froze their accounts.

One such client that Esquire Philippines contacted said he still had P100,000 “stuck” with the company. The client, who we’ll refer to as Ken as he prefers not to be identified by his real name, has been in the garment manufacturing business since 2012 and has 10 employees. He says he’s been using Salarium since 2016.

“We are actually a very long-term user, we started way back when they had version 2.0. (the latest was 3.0),” Ken said. “We adopted their service because we were a small business of less than 10 employees, and we didn't need or want to use third party agency. We also wanted to find a way that would allow me to have access to it all the time while I am in Japan where I reside. 

“They have been good up until 2022,” he added. “I really think COVID hit them hard, but the biggest issue I suspect is the management.”

Salarium also has a financial product called SALPay, an app that has an e-wallet, a debit Mastercard, and a financial services suite for employees and their families. SALPay was the payroll disbursement service that some clients used that reportedly went “out of service” in August, leading to irate customers posting on social media to air their grievances.

One of the first public posts about the issue was a thread on Reddit by a user named Moonoverwano, who said that the money he deposited to his Salarium account was “held” by the startup ostensibly due to a reconciliation issue with its partner bank Unionbank.

“They are not allowing any deposit, withdrawal to the Salarium accounts,” Moonoverwano said. “So I cannot withdraw my remaining money there.”

Ken meanwhile, was in a similar predicament.

“We had P400,000 stuck with SalPay when they closed their service,” he told Esquire. “Luckily, the company returned the P300,000 we just deposited days before this event (referring to the suspension of operation). “But the P100,000 we had we were not able to withdraw”

“I'd imagine some bigger company might have more (money) stuck with them,” he added.

Indeed, browsing through the comments in the original Reddit thread—as well as at least two more started in the succeeding months and on Facebook—will reveal similar stories of angry and frustrated customers, many of whom are business owners who were left unable to pay their employees after Salarium froze their accounts in the platform. Some said the money they have with Salarium has reached six or seven figures.

“Do you have any idea when we’ll be able to have access to our funds?” asked Reddit user tiuyeo. “Deadma lang our HR, mukhang napagod na kakakulit sa salpay and kaka reklamo namen. Mag-one month na yung issue. Some of us 6-digits ang nahold kasi hinde agad na transfer. My goodness!”

“Same here.,” said u/glsl200122. “We use Salarium as our payroll system and Salpay as our disbursement facility. We are going to file a complaint to BSP and SEC.” 

“Same here,” added u/Indian_mango. “I still have funds on my wallet and I can't withdraw it because you have to move it to your card which is impossible because they disable the features for that! This issue is still ongoing for almost two weeks now and I believe two weeks for a system maintenance is NOT NORMAL. They should inform/posts prior advisories/announcement first! Their customer service is not that good as well. They keep on replying with templated messages.”

While these messages were posted three to four months ago at the beginning of the issues with Salarium, the issues Ken mentioned are more recent as we talked to him only on Saturday (January 6).

Esquire Philippines has reached out to the founder and CEO of Salarium, Judah Hirsch, but we have yet to receive a reply. Many other users and clients said they have reached out to him and to his staff through the company’s customer service portal, but many say they’ve either been bounced around by inept customer service representatives or “ghosted” completely.

What is Salarium?

Salarium is a payroll and financial solutions company that was founded in May 2013 by Hirsch, who is an Israeli national. Clients use the company’s payroll solution to calculate the hours of their employees in compliance with Philippines’ labor laws and tax regulations.

“Once the calculation is complete, they can then disburse their employees’ salaries directly from SALPay’s web terminal, which instantly sends the credits to the SALPay Wallets of employees using the SALPay solution,” Salarium said in its company profile.

While some clients just use Salarium’s payroll solutions platform, a good chunk of them also signed up to use the SALPay app to disburse the funds direct to their employees.

“To use SALPay to pay employees, businesses load up their corporate wallets by depositing cash to the SALPay account system using any major bank in the Philippines. After SALPay’s treasury team verifies the transaction, businesses will be able to view their available balance in their corporate SALPay Wallet and use the funds to carry out salary disbursements. Once the funds are in the employees’ wallets, they can use it with their debit Mastercard, pay bills, transfer to family and friends, and buy pre-paid load.”

Salarium said it has several revenue streams. It earns by charging $0.50 to companies per disbursement instruction processed. The startup said a majority of its clients process at least two payments per month. However, the company said it earns a majority of its revenue “from the financial services it provides to SALPay Wallet holders, which include: fees derived from ATM and POS transactions using the SALPay Finance debit Mastercard; fees charged on transfer of funds from SALPay Wallets to other banks in the Philippines; fees derived from sale of digital goods like prepaid mobile phone credits and bill payments; together with fees from micro- finance, micro-insurance, and micro-mutual financial services.”

It's worth noting that, in November 2017, Salarium launched an initial coin offering (ICO), from which reports said it raised as much as $13.5 million. However, by November 2018, Salarium offered refunds to everyone who bought tokens during the ICO. 

There’s no updated information on the current valuation of Salarium, although GetLatka says that the company reported $9.5 million in revenues in 2020, while CB Insights says the company has so far raised $1.07 million over three investment rounds. According to its own corporate profile, Salarium’s investors include John Orrock, founder and CEO of Barhead, ex-founder of Cloud Sherpas, and managing partner of FutureNow Ventures; Vincenzo Ciummo, founder and CEO of VC Growth Partners; and Jean Henri Lhuillier, CEO of Cebuana Lhuillier Financing. 

Salarium’s issues

Throughout the company’s operations in the Philippines, as Ken mentioned, Salarium’s system worked, and clients were generally happy with it. However, like any other fintech startup, there were a few kinks that led to client complaints. In January 2020, for instance, a post on the Startup PH community on Facebook voiced concerns about problems he was having with the platform and even asked for alternative payroll solutions his company could explore. 

In December of 2020, another post in the same startup Facebook community reported a bad experience with Salarium and asked for help to contact the company’s Accounting Department after email, sms, and calls to the company went unanswered.

But the major problems began in August 2023, when clients started complaining after Salarium froze the accounts of its clients, rendering them unable to access the funds and disburse the salaries of their employees. Salarium initially said the freezing was due to “system maintenance,” although some clients reportedly got messages that “auditing” was ongoing. Regardless of the reason, clients were left with little choice but to post their complaints on social media after weeks went by and the company could not give them a straight answer about their funds.

Some clients even reported going to Salarium’s registered office in Poblacion, Makati, only to learn that the company had long vacated the site.

Some media outlets like Rappler and Bitpinas, also picked up the story and reported on the customer complaints. Many clients reported getting the runaround by customer service rep, until they could no longer get direct replies to their queries. Messages direct to Hirsch, the company’s founder CEO, were also left unanswered. 

What Salarium needs to do

Esquire Philippines talked to a prominent investor in the local startup ecosystem and asked for his thoughts on the whole issue. Preferring to remain anonymous, the investor, who says he knows Hirsch and has met him on a few occasions over the years, believes that the appropriate thing to do for Salarium at this point is to exercise transparency. 

“Salarium needs to engage with the community,” the investor says. “First, engage directly with their clients, and second, engage with the outside startup community so everything’s trasnparent. The lack of transparency will lead to lots of rumors, and rumors are never good for the whole ecosystem.

“Salarium needs to ensure that the reputation of the business continues to be good,” the investor adds. “And the best thing to do that is to be transparent about the whole thing.”

A second investor, a veteran of the startup industry and board member himself of a few startup companies, said it’s up to the legl system to set things right in the Salarium case. “We should rely on the courts to adjudicate,” he said. “The second thing is that the company should do the right thing for their customers, to make sure that they’re impacted as little as possible.

“When they do that, that’s when you know that (the startup) is in it for more than just the money,” he added.

This is a developing story. Check back for updates.