A payroll continuation (or contingency) plan is a documented strategy to achieve your payroll goals in the event of a natural or man-made disaster.
The plan outlines the possible steps to manage payroll through interruption.
Disasters come in many forms. There are fires, hurricanes, tornadoes, floods, earthquakes, pandemics, terrorist attacks, cybercrime – for some. When they strike, employers must have a payroll continuation plan.
Payroll Obligations During Disasters
Employees who are not covered by the Fair Labor Standards Act (FLSA) are required to pay less than the federal minimum wage, as well as pay overtime pay for more than 40 working hours during the workweek.
U.S. oversees FLSA The Department of Labor said, “These [minimum wage and overtime pay] requirements are not subject to amnesty during natural disasters and recovery efforts.”
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Under the FLSA, unpaid employees must be paid only for non-working hours, including during disasters. Exception employees are a different story though.
Exempt employees should receive their full day’s pay if sent home quickly due to a disaster. Also, they should get their full salary if your business closes within a week – however, you can deduct the missing time from their available PTO.
If your business closes for a full week, you do not have to pay employees who are exempt for that week.
The bottom line is that no matter what crisis your business is facing, your employees are entitled to the wages/salaries they should be paid.
Note that many states have laws mandating pay-as-you-go frequencies such as weekly, bi-weekly, semi-monthly, or monthly. Employers cannot pay employees less frequently than the state-mandated time limit.
Besides, employers must perform all legally required payroll duties, including sending and reporting payroll taxes – unless the government provides relief.
What if payments are delayed?
Some states require employers to give employees written notice of any changes that may affect their payroll.
If a disaster causes delays in employee payments, employers should notify their employees as soon as possible (in writing) – even if the state does not require written notice.
Notice, for example, that disaster has caused a setback in payroll processing and when employees expect to be paid.
Legitimacy aside, employees are required to be paid more than ever during uncertainty.
The payroll continuation plan helps ensure timely payment – and is less of an issue for employees to worry about.
What is in the payroll continuation plan?
The specifics of the payroll continuation plan vary by employer. Typically, however, this process involves conducting a payroll risk assessment and implementing disaster recovery policies.
Payroll Solutions may include
- The priority list of payroll responsibilities, so you know what to deal with first when disaster strikes
- Backup copies of payroll files
- Web-based technology allows you to run payroll from anywhere; All you need is internet access and a computer
- Online time management system, so your employees can clock in and out remotely
- Manual payroll processing tools in case of internet or your computer crash – e.g., hard copies of paper timesheets, calculators, paper checks, and payroll registers showing previous wages and deductions of employees
- Replace, replacement staff for out-of-work payroll employees
- Payroll staff security, such as responses when dealing with troubled people
- Payroll evacuation procedures, such as fire risk
- Multiple payment methods for different disaster situations – e.g., direct deposit, pay cards, and paper checks
In fact, you can always partner with a trusted third-party provider who will handle some or all of your payroll tasks.
Even if the provider has a business continuity plan, it is a good idea to develop your own contingency strategies to keep the disaster provider out of service.
A Risk Management Specialist can help you create a contingency plan.