Why You Need a Payroll Continuity Plan

Why You Need a Payroll Continuity Plan

Payroll is a mission-critical function — one that must be done even amid disasters or emergencies, such as:

  • Pandemics.
  • Storms.
  • Hurricanes.
  • Flooding.
  • Tornadoes.
  • Fires.
  • Earthquakes.
  • Terrorist attacks.
  • Cyberattacks.
  • Active shootings.
  • Loss of electricity.

These catastrophic disruptions can occur unexpectedly. But when it comes to payroll, you are expected to be prepared — hence the need for a payroll continuity plan.

Why a continuity plan is essential to payroll

Depending on the severity of the crisis, the federal, state and local governments may issue mandates delivering various types of payroll relief. Still, employers are required to have the basics down, including paying employees for work done up until or during the disaster and fulfilling their payroll reporting and tax obligations.

In fact, in a 2019 fact sheet, the U.S. Department of Labor says that employers are bound by the Fair Labor Standards Act's minimum wage and overtime pay criteria even during natural disasters, and these requirements are not subject to waiver.

But if you're unprepared, the disaster can severely impair your ability to meet your payroll responsibilities. This can lead to:

  • Employees being paid late or not at all.
  • Improper payroll recordkeeping.
  • Noncompliance with federal, state or local payroll laws — which results in penalties.
  • Employment contract violations and labor disputes.
  • Late payments to third parties, such as employee benefits providers.
  • Decrease in employee morale and productivity.

Fundamentals of a payroll continuity plan

Developing a payroll continuity strategy means assessing potential threats and finding solutions. This involves collaborating with your payroll, human resources and finance teams plus legal, risk management and information technology experts.

At a minimum, be sure to have the following items handy:

  • Payroll resources, such as fully charged laptops (in case your main computers go down), paper checks and printers.
  • Supplies for calculating payroll manually.
  • Mobile access so you can access and run payroll from anywhere.
  • USB flash drive to store payroll files.
  • Preestablished check-signing procedures, such as e-signatures so checks can be distributed without needing handwritten signatures. 

In addition, you should:

  • Institute guardrails to protect against security threats, especially for processing payroll remotely and storing payroll files.
  • Determine where your payroll staff will work during the disaster or emergency — that is, if you perform payroll in-house.
  • Encourage all employees to accept electronic payments, such as via direct deposit or pay card, to ensure timely payments during disasters or emergencies.
  • Implement protocols for tracking employees' time, including overtime and paid or unpaid leave. 
  • Go paperless to facilitate online pay stubs and reduce hard-copy payroll files.

If you haven't already, consider using a payroll service provider, as this will vastly lower your payroll-related stress. During disasters or emergencies, the payroll service provider can make sure your employees are paid on time and that your other payroll obligations are met.

Copy right 2020

Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Copyright © 2018 IndustryNewsletters. All rights reserved.

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