Payroll's Role In Corporate Disaster Preparedness Planning
Disaster preparedness plans are known by many names including Business Emergency Plan
, Crisis Management, Business Continuity Plan, Disaster Recovery Plan, and Contingency Plan. These phrases all boil down to the same question: What is a business, your business, going to do if disaster strikes?
A disaster is defined as: An occurrence causing widespread destruction and distress; a catastrophe. For payroll, it is anything that disrupts your pay process.
Companies large and small across the globe are looking for ways to ready themselves for disaster before it strikes. In most buildings you see emergency evacuation routes, fire extinguishers, and first aid kits. Your company may have documents, brochures, or posters outlining emergency assembly points, threat avoidance tactics, training programs, and testing procedures. The most basic of plans also include a prioritized list of critical operations, staff, and procedures needed to recover from a disaster with an outline of how emergency plans are communicated to employees. Other components of the disaster plan include: life safety (how to account for employees), containment and cleanup, damage assessment, interim operations, and a process on how to get the operation back to normal.
Does your business have a disaster preparedness plan? Do all employees know what it is? There are many resources on the internet to help a company build a disaster recovery plan. One such resource is available at
Ready.Gov.
Most of the resources I have found focus on the business in general, but what about payroll? Has your payroll department contributed to the corporate disaster preparedness plan? Payroll departments have a key role in corporate disaster planning, although most do not realize it until it is too late.
In a disaster, an employee's need to access their pay is greater than ever. For those of us on direct deposit this is not an issue, but according to the FDIC Economic Inclusion Study, more than 25% of US households are un- or underbanked. This means that approximately of the US workforce does not use direct deposit because they do not have a bank account.
Reasons for not using traditional banking vary according to the study, including: not having enough money to need an account, a dislike for high service charges, bouncing too many checks in the past, distrusting banks, and facing a language barrier at banks. The one I personally relate to is "banks do not feel comfortable or welcoming." I have accounts with both a traditional bank and a credit union. I like walking into my credit union, but the bank, no thanks! It is in a nice part of town, and yet the tellers stand behind thick bulletproof glass walls. I do not ever feel comfortable going into the bank. If I have to go to the bank, I usually drive to another branch 10 minutes away where they do not have the bullet proof teller windows. Anyway, back to the unbanked.
Employees who do not participate in direct deposit get paid by paper check. If they don't have a bank account, they probably take that paycheck to a bank or check cashing store to cash it. Most banks are charging non-clients between $5 and $8 for cashing checks even if the check was drawn on an account from that bank branch! Check cashing stores and vans charge up to 20% of the checks value.
Unbanked Americans face other issues besides paying a fee to cash a paycheck. What happens when: a paycheck is undeliverable due to severe weather; overnight packages with paychecks are stuck in a snow storm; an entire city is shut down because of a natural or man-made disaster? Payroll operations do not need to be directly affected to impact employees who rely on a paper paycheck.
One of the most compelling stories during Hurricane Katrina was of a large company with a national footprint that actually had (and has) a corporate disaster preparedness plan in place. Their plan includes a provision that distributes $500 aid to every employee affected by a disaster for food, shelter, and whatever else they may need to get by. During Katrina their payroll operations were not affected, but several stores located in the Gulf Coast region were. The financial aid was built into the corporate plan well ahead of time. Their plan was designed to help all employees touched by disaster. The problem? Only 1/3 of those affected employees were on direct deposit. Emergency assistance funds were undeliverable to the rest because of flooding and evacuation, and the few people who received their paper check went to the check cashing stores only to find them closed or out of cash entirely. And even then, many employees evacuated their homes without ID, which made it impossible to cash a check regardless.
Thousands of displaced people packed stadiums, churches, schools, and even make-shift shelters. As if they didn't have enough to worry about with their homes under water, they had to figure out how to contact their employers to have paychecks re-issued or re-routed to wherever they were staying. That process took time. While employees on direct deposit still had plenty to worry about, they at least had the assurance that their money was safe and accessible when needed. Shortly after Hurricane Katrina, that same company revamped their disaster preparedness plan to include a direct deposit mechanism for every employee.
Many disaster preparedness plans do not include payroll. Plans should include:
1. An appointed payroll emergency team. The payroll emergency team knows the procedures to follow to issue and deliver payroll/aid.
2. Back up banking contacts. Set up alternative banking resources to ensure your processing systems are operational even when your primary banking contacts are unavailable.
3. Tax resources. Set up a tax preparation service specializing in business contingency planning or appoint a person in your organization to learn about Disaster Assistance available through the IRS. The Self-study course is available on the
by: Thomas Secor
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