Have you considered the scenarios that might affect your ability to process payroll?
It’s a regular Wednesday morning. You get to work a few minutes earlier than usual because you’ve got a big day ahead of you; you have to run your bi-weekly payroll. But something’s different this morning, there’s a buzz around the office. Someone says she can’t get into emails; someone adds that although he can launch applications from his laptop, he can’t retrieve any file that was stored on a network server. Curious about what may be going on, you immediately log into your payroll application; or at least you try to. Nothing’s happening. That first tinge of concern sets in – you have to transmit your direct deposit file by 4 p.m. today or some employees may not get their deposit in time for start of business on Friday. Thirty minutes later, still nothing, and that tinge of concern is quickly turning into panic.
Just then, your phone rings; it’s your boss with information that IT has informed all Department Heads that the outage overnight is serious and that most systems are compromised, including your payroll application. She knows you’re running your national payroll today and asks what you do in these situations. She wants to know what your Plan B is. She’s assuming you have a Plan B. Do you?
If this happened to you, would you be able to give your boss an answer? Have you taken the time to think of what you would do should you ever be put into a situation where, for some unforeseen reason, you can’t get your deposit file to your bank in the normal fashion?
As the person responsible for ensuring that funds make it to each employee’s bank account on pay day, you have a responsibility, an implied contract essentially, that funds will be available on time. Your employees have arranged with their banks to have bi-weekly mortgage and loan payments withdrawn automatically from their bank accounts usually the same day as their pay is deposited. The impact of the funds not reaching their bank accounts become compounded; they start affecting people’s credit ratings. A 2015 survey by the Canadian Payroll Association (CPA) identified that, nationally, 48% of Canadian employees say it would be difficult to meet their financial obligations if their pay was delayed by a single week. You do not want to be the reason that happens.
You say your payroll is outsourced, so this doesn’t concern you. You’d be wrong! You may have contracted out the running of your payroll, but the responsibility to get funds into your employees’ bank accounts remains yours. The scenarios may be different than if you run your pay in-house, but you need to plan for possible vendor failures as well.
Here are the most common reasons you may not have access to your payroll system along with some of the questions that may inform your Plan B:
- You lose access to your payroll system itself (the aforementioned scenario)
- Do you have a backup payroll system you could use that is up and running, and up-to-date?
- Could you use the last pay as a basis for this pay?
- Your payroll system is fine, but you can’t get into your office to run pay
- Do you have a tested remote processing site that can access your payroll system?
- Your payroll system is fine, but the Internet is down and you can’t transmit the file to the bank
- Could you hand deliver the file to a nearby processing centre?
- Could you somehow get your bank to take your file to their processing centre?
- Important Note: Some assume that you can simply ask your bank to re-deposit the previous pay, but they can’t! Most do not keep those files after processing, and most say they could not re-process a file that has already been used because the file sequence number prevents this sort of mistake. Could you manipulate a previously deposited file? That is up for discussion.
- Your payroll system is fine, but the persons needed to run your pay have been struck by a debilitating flu bug
- Are your processes fully documented so that pre-identified (and hopefully pretrained) individuals can at least get the basics out of your payroll system so that a file can be transmitted?
- Your payroll system is fine, but the system that feeds its time transactions for hourly-paid employees fails. How would you calculate their pays? How many hours would you pay them without knowing how many hours they worked?
- Do you have senior management approval to pay someone a fixed or average number of hours when you can’t really find out how many hours they actually worked?
- Your payroll process ran fine, you’ve transmitted your direct deposit file on time, but your bank’s system has failed before distributing the deposits to other banks nationwide. How would you get money into your employees’ accounts?
- Would you be equipped to give funds to the employees who need an advance until the funds reach their accounts?
These are just some of the possibilities to discuss when forming a Payroll Business Continuity Plan (BCP) for your organization. The CPA’s Payroll Continuity Best Practices Guidelines, available to members at payroll.ca, is an essential tool that enables organizations to develop a BCP and plan for unexpected scenarios that may affect payroll. Every situation will be different, every employer will be different and every scenario will have different outcomes based on your specific circumstances. Payroll practitioners should arrange to meet with all payroll stakeholders to have a detailed, frank discussion regarding payroll continuity. Who invokes the triggering of the plan? Who exactly does what, should any of the given scenarios happen?
There are so many different items to consider once you open this can of worms; but open it, you must. To not have a Plan B is a dereliction of your duties. Payroll is the reason people come to work, and you are mandated to ensure they get the monies owed.
This article is an excerpt from Dialogue magazine, a publication for members of the Canadian Payroll Association. Find out more about membership at their website, www.payroll.ca.