Got a Payroll Continuity Plan? Here’s What Employers Need to Know
Disasters come in come in many forms. From fires, floods, hurricanes, and earthquakes to terrorist and cyber-attacks, and yes, pandemics — just to name a few. So when disaster strikes, it’s critical for any employers to have a payroll continuity plan in place.
So, what’s a payroll continuity plan?
A payroll continuity (or contingency) plan is a strategy that documents steps to reach your payroll objectives should a disaster or any kind of unforeseen emergency strike. The plan should outline ways to manage payroll through the disruption.
What payroll obligations do employers have during an emergency event?
The Fair Labor Standards Act (FLSA) requires employers to pay covered nonexempt employees no less than the federal minimum wage, plus overtime pay for hours worked over 40 in a workweek. The U.S. Department of Labor, which oversees the FLSA, says, “These [minimum wage and overtime pay] requirements are not subject to waiver during natural disasters and recovery efforts.”
Under the FLSA, non-exempt employees must be paid only for hours worked, including during disasters. Exempt employees, however, are a different story. Exempt employees must receive their full day’s pay if they are sent home early because of a disaster. Moreover, they must receive their full pay if your business closes for less than one week — though you can deduct the missed time from their available PTO. If your business closes for a full week, you do not have to pay exempt employees for that week.
So, no matter what crisis your business may face, your employees are entitled to any wages/salaries owed to them. Keep in mind, many states have laws mandating wage-payment frequencies, such as weekly, biweekly, semimonthly, or monthly. Employers can’t pay employees less frequently than the state-mandated timeframe.
Furthermore, employers must perform all other legally-required payroll duties, including remitting and reporting payroll taxes — unless the government provides relief.
What if paychecks are delayed because of a disaster?
Some states require employers to give employees written notice of any changes impacting their paydays, including late payments caused by a natural or man-made disaster.
Should a disaster delay an employees’ paycheck, the employers should let their employees know (in writing) immediately — even if the state doesn’t require written notice. The notice could, for example, explain how the disaster caused a delay in payroll processing, and when employees can expect to be paid. This is usually a big problem for companies and small businesses who manually process payroll. For those who automate payroll, this shouldn’t be an issue. However, if a businesses’ cash flow becomes impacted, there are financing options available. One solution we offer is Fingercheck financing – offering up to $5K to businesses to cover payroll with no underwriting required.
Obviously, in an unfortunate event, employees need their paychecks more than ever. A payroll continuity plan helps ensure timely payment — and provides one less headache for employees to worry about.
Putting a payroll continuity plan in place
The specifics of a payroll continuity plan will vary by employer. However, the process involves conducting a payroll risk assessment and implementing disaster recovery mechanisms. Solutions may include:
- Create a list of payroll responsibilities – so you know what to deal with first in the event of a disaster
- Backup copies of payroll files
- Web-based technology that lets you automate and run payroll from anywhere; AKA Fingercheck is all you need along with internet access and a computer
- Online time and attendance system, so your employees can clock in and out remotely a service also provided by yours truly, Fingercheck.
- Manual payroll processing tools in case the internet or your computers are down — e.g., paper timesheets, calculators, paper checks, and hard copies of payroll registers showing employees’ previous wages and deductions
- Replacement personnel to fill in for payroll employees who cannot come to work
- Payroll evacuation procedures, such as in the event of a fire
- Multiple payment methods, for different disaster circumstances — e.g., direct deposit, pay cards, and paper checks
The best plan is to arm your business with technology to automate payroll. It will offer you the coverage you need in times of trouble and make things simpler and worry-free every other day of the year. And another big plus is that all your quarterly and year-end filings are taken care of at tax time. So, consider automating payroll now to avoid any disruption in your payroll whether an unfortunate event occurs or doesn’t. Because after all, not automating your payroll could be a disaster waiting to happen.