Issuing employee paychecks on time and accurately are two of the most important tasks that a bookkeeper or payroll clerk faces every week. Sure there are other important tasks as well; such as remitting payroll taxes to the proper agencies, completing payroll tax reconciliations, paying the company bills, and submitting invoices to your customers so you have a steady cash flow. But on a weekly basis the most important thing is to get those checks into the hands of the employees who have worked come payday. After all, they deserve it.
Over the years, I have worked with thousands of companies (and done my fair share of payroll processing tasks, as well) and one of the things that confuses me most is the fact that very few companies have a backup plan for getting money into their employee’s hands in the event of a disaster or other emergency. Disasters come in all shapes and sizes – from a computer crash, loss of internet, or loss of power to a flood, a hurricane, or a fire and you do need to be prepared for any and all of them.
Implementing a Payroll Backup Plan
One of the first, and perhaps most important, steps of implementing a backup plan for issuing payroll in the event of an emergency or disaster is – don’t wait until the last minute to run your payroll!
I can’t tell you the number of times I’ve had clients and customers call me late Thursday afternoon saying “my computer just crashed (or I don’t have an internet connection or perhaps our power is out) and I HAVE to have paychecks ready first thing tomorrow morning – what am I going to do?”.
Depending upon the type of disaster it is that you are facing will depend upon the type of payroll backup plan you need to have in place, here are just a few items that are helpful (and why) in the event of an emergency:
- A laptop (with a fully charged battery), QuickBooks and a backup of your QuickBooks data file – even if your power is out your laptop is fully charged and with a backup of your QuickBooks data you can create paychecks, even if you have to hand write them.
- Hard (paper) copies of paystubs and or payroll summary reports – I know, the suggestion of paper copies in our paperless society is asking for trouble. But if you have no power, no laptop, or your computer crashed; if you know how many hours your employees worked this week you can look up old paychecks with the same number of hours and hand write them a check if you had to.
- Issue a payroll advance explaining to your employees that this advance will be paid back as an employee payroll deduction from future paychecks. Payroll advances are a life-saver in just about any type of emergency, even if you use Inuit Online Payroll and either you have no internet or their site is down.
- Contact your CPA or tax professional – if you are in dire straits perhaps they can run payroll for you, if they have a copy of your QuickBooks data file – even if it’s one that is several months old.
- Make sure there are at least two people who know how to run payroll – yes, payroll is sensitive financial data and you don’t want absolutely everyone to have their fingers in your company payroll. However, having a second person, who has been trained to run payroll is absolutely invaluable. You simply cannot just not issue payroll if the normal payroll clerk is out sick, has to take a leave of absence due to a family emergency, or is hospitalized due to some sort of accident.
- In the event of an impending storm, calculate what you would need to give each employee as a cash advance, cut a total check, code it to petty cash, and distribute a cash advance to each employee. Make them sign some sort of receipt that they received $X amount of dollars as an advance and that payment would be made via payroll deductions in future paychecks. Go to the bank and actually cash the check and put the money in the company safe in case the storm is severe.
- Perhaps you use an online payroll service and the site is unavailable – use a web based calculator and handwrite the checks. Here are some web based paycheck calculators – http://payroll.intuit.com/paycheck_calculators/ and http://www.paycheckcity.com/
If your emergency involved a power outage, loss of internet, or you use an on-line payroll service and are unable to transmit your payroll data for any number of reasons contact the provider when you are ready to transmit the data to have them refund any backdating fees associated with the transmission. Intuit offers a refund of backdating fees in most instances, I do not know about this specific policy for other on-line payroll providers, so be sure to check with them for specifics.
The IRS will have specific details for late tax deposits/filings as a result of a natural disaster. Go to www.irs.gov for more information. The IRS also has natural disaster information to assist customers. Specific state websites will also have information for state tax deposits/filings.
These are just a few suggestions for you to think about. What sort of payroll backup plan do you or your clients have in place in the event of an emergency?