The University of Washington: Facilities Services

Payroll

PAYROLL

Payroll is often an overlooked area of business continuity. Small business owners may assume that their employees hold a level of dedication to the business that is higher than the actual reality. They may assume that employees will continue to work without pay during or after a disaster out of a sense of loyalty or altruism. This assumption is often proven to be unrealistic. This doesn’t imply that employees are not loyal to their employer, but is offered as a reminder that when disaster strikes, most employees will consider the needs of their families as their top priority.

Many people in our society live in a just-in-time paycheck lifestyle. Many people cannot go without a paycheck for even one pay cycle without starting to experience difficulties with meeting life’s numerous financial requirements. Just as employers should not rely on employee good-will in the face of a financial hardship that may result from disaster, employees should not assume that their creditors will be forgiving when unable to meet financial obligations due to a lack of pay. Disaster causes stress in even the best of situations. Those employees who are not receiving pay as a result of a disaster will have an even greater level of stress. Those employers who fail to make payroll for even short durations may see an increase in employee absenteeism and even departures for companies who are making payroll despite a disaster. This can cause a secondary crisis for your business that will further complicate your efforts to recover.

Payroll should be high on the list of preparedness and continuity planning for a small business owner.

What is your current payroll continuity?

Ask yourself some of the following questions when considering the survivability of your payroll system:

  1. Could I pay my employees if I were not actively receiving customer monies for two weeks?
  2. Is your payroll system fault-tolerant? If it’s automated, do you have back-ups of necessary financial data and are those back-ups stored safely off-site? Have you restored those back-ups as a test to confirm they are viable?
  3. How good is your relationship with your financial institution that handles your business account? What processes does it have to ensure continuity of their operations that support your business? If you needed an emergency loan to make payroll, how quickly could you expedite that process?
  4. How many of your employee require a physical check as opposed to direct deposit? Physical checks are more difficult to produce and distribute during a disaster that simply continuing direct deposit.
  5. What financial information relating to payroll are you required to produce in compliance with local, State and Federal laws and statutes? If they were to perform an audit, could you produce the necessary documentation? Don’t assume that a disaster will automatically cause government tax collectors to offer extensions on tax requirements and filing deadlines.

Where to go next?

Consider doing some investigation into payroll continuity. Find out what’s available for payroll services, software, etc. Learn the tax codes that affect you and find out if your assumptions regarding payroll are accurate. You may also consider:

  • Encouraging your employees to go to direct deposit rather than paper checks.
  • Meet with your financial institution and find out what they can do to help you if you are struggling to make payroll after a disaster.
  • Talk with your employees about your ideas on how to ensure payroll if your business is interrupted. Ask for their input on how to protect payroll.

Potentially Helpful Sources of Information