Nov 21, 2024

Creating a Payroll Continuity Plan

When a disaster strikes, it's critical to have a payroll continuity plan — a document outlining the steps necessary to manage payroll through disruption. Click through to learn how to create a multitiered plan that prepares your organization for many possibilities.

No matter what crisis your business may face — infrastructure collapse, regional power outage, bomb threat, pandemic, flood — your employees are entitled to any wages or salaries owed to them. It's important to have a plan that allows you to make payroll during a crisis, thereby meeting your legal obligations to ensure workers receive their pay on time.

Employers are not allowed to pay employees less frequently than the state-mandated time frame (weekly, biweekly, bimonthly, etc.). Employers are also obligated to perform all other legally required payroll duties, including remitting and reporting payroll taxes, unless the government declares otherwise. However, the U.S. Department of Labor, which oversees the Fair Labor Standards Act, has noted that minimum wage and overtime pay requirements aren't subject to waiver during natural disasters and recovery efforts.

In the event of an emergency, you will need a payroll continuity plan. A singular plan is not as good as one that covers a variety of scenarios and timelines. Start by imagining all the possibilities, then create plans to respond to the variety of crises. Remember that in addition to payroll staff, vendors and service providers will need to know what steps to take to deliver payroll in a crisis. The plans should also dovetail with your IT department’s disaster recovery plan, and both departments should understand where they intersect. A further consideration is building redundancies into the system that will accommodate transfers of funds and allow for operations to resume off-site.

The last step to consider is the communications strategy. Who determines whether there's a crisis? Who communicates with whom about which plan to enact? Who is the central point of contact?

Planning for the unexpected

Among the scenarios to consider are these:

• What if you lose access to your paper check stock?
• What if you lose access to electronic files and folders in the cloud?
• What if you are not able to access your computers, the internet, your printers or scanners? What if they are destroyed?
• What if you are not able to get to the physical office? Or what if only some personnel are able to be present?
• What if you lose access to your payroll team or other key people in your payroll process?
• What if the personnel who approve payments are not available?
• What if your payroll provider (if you have one) is offline? How will you cover for them?

Payroll continuity involves conducting a payroll risk assessment and implementing disaster recovery mechanisms. Solutions include:

• Create a list of payroll responsibilities so that you'll know what to deal with first when disaster strikes.
• Establish backup mechanisms for all payroll records, including those stored in the cloud.
• Consider using web-based payroll solutions so that you can run payroll from anywhere.
• Choose online time and attendance systems so that workers can clock in and out remotely.
• If you use a manual system, be certain that there are backup copies of all files off-site. These will include paper timesheets, calculators, paper checks and hard copies of payroll registers to show employees' previous wages and deductions.
• Train replacement personnel who can fill in for payroll employees who can't get to work.
• Encourage a multitiered system whereby people can be paid by direct deposit, pay cards or paper checks.
• Know whom you are obligated to pay, how much you must pay and for how long you must pay it.

Walk through your payroll continuity plan and update it in light of changing technology and business structures. While meeting payroll may not seem as significant as evacuation and data recovery, your employees may face real financial costs in a crisis. Disaster aid and insurance checks may arrive slowly. With payroll continuity, you can ensure that timely payment is still possible so that workers have one less thing to worry about.