Pandemic Gives Employers Wake-Up Call on Contingency Planning

Employers that lacked a disaster plan before the coronavirus struck earlier this year likely will have one in place by the end of the year, a payroll director said June 24.

For employers that did not want to develop a business contingency plan, “I guarantee that at the end of 2020 you’re going to have something documented about how you handled what happened,” said Laurel Serra, CPP, payroll director at Palm Beach State College in Florida.

A pandemic is among the disasters that could affect a company, Serra said at the American Payroll Association’s 2020 Virtual Congress.

The list of business disruptions, natural or man-made, is lengthy and includes hurricanes, tornadoes, blizzards, ice, flooding, earthquakes, fire, power failures, accidents, employee retirement and termination, illness, death, security breaches, system malfunctions, loss of a third-party payroll provider, computer problems, and active shooters.

The coronavirus crisis was a wake-up call for many employers, Serra said.

“We all went home on a Friday, thinking we were coming to work on Monday, and we find out on Sunday that no one is going back to work and here we are, three months later, still not in our offices,” Serra said.

Disasters can occur quickly, leaving little time to put together a recovery plan, said Ansleigh Smith, CPP, payroll and employment tax manager for the U.S. and Canada at Equifax Inc. in Atlanta. A hurricane or blizzard might offer up to a week’s notice of striking an area and a retirement can be planned over a few months, but earthquakes, fires, accidents, security breaches, and power failures usually occur without warning, she said.

And the aftermath could be lengthy, too, with up to two weeks for earthquakes and storms, a week for a security breach, and up to three months after the retirement or loss of an employee, Smith said.

Developing a Contingency Plan

In establishing contingencies, employers should identify the reasons for a plan, review lead and recovery times, determine the effects of various scenarios, identify resources, and plot out workflows.

For example, policies and solutions surrounding payroll should be discussed, Smith said. Payroll departments should identify the steps and responsibilities and how they affect staff members, she said, adding that lists should be kept of due dates for taxes, reporting, federal and state forms, vendor payments, and deductions. A risk-assessment survey should be conducted to evaluate disaster scenarios.

The members of the team developing the plan’s checklist should include key workers in the payroll department as well as members from information technology, human resources, and communications, Serra said. It is important to ensure that workers are familiar with the plan and can perform different jobs in an emergency, especially if working remotely, she said.

A good way to test a contingency plan is to have a new worker carry out unfamiliar tasks according to the checklist, Serra said. Deficiencies in the plan then would be easy to spot, she said.

If an employer decides to have workers telecommute, the employer should ensure that employees have the equipment they need, Smith said. Laptop-computers, mobile phones, and printers could be company-issued or personal devices, she said. The same can be true of internet connections, whether from an employee’s residence or through a company-provided hot-spot device. Phone numbers should be updated and on file so a phone tree can be carried out in an emergency.

Employers that regularly provide on-site wage payments in cash should consider alternatives, such as check printing and payroll debit cards. While printed paychecks generally are not the norm, companies that provide such checks should ensure payroll workers have access to mail supplies, card stock, and stamps, Serra said, adding that a bank might be able to provide third-party printing services.

Maintaining payroll compliance is important in any disaster plan, Serra said. For example, nonexempt workers under the Fair Labor Standards Act must by paid at least the federal minimum wage for all hours worked, with overtime at time and one-half their regular rate for hours that exceed 40 in a week.

Contingency procedures should be well-documented, with backup copies easily accessible by staff members, Smith said. A central place in a computer can be used as well as offline cloud storage, she said.

The plan should also be updated regularly, at least every quarter, Serra said. The plan also should be reevaluated after a disaster, with changes made depending on what solutions succeeded or failed, she said.

“A business contingency plan should be looked at as a living document,” Serra said. “Everyday something changes, so you have to update the plan.”