Hurricanes Harvey and Irma have caused widespread damage that will likely take years to fully recover from. Such is the nature of natural disasters of such huge proportions. If anything good can come from these sorts of things, it can be found in the lessons learned from them.
In the realm of payroll processing and benefits administration, there are multiple things to be learned from the events of the last couple of months. Harvey and Irma have reminded us that the U.S. is not immune to disastrous natural events. To not learn from them only adds to the problems they caused on the ground.
In light of that, there are three important payroll lessons we sincerely hope businesses of all sizes have learned:
1. Regular Data Backups Are Critical
In the short time between Harvey and Irma, the IRS took on the responsibility of warning business owners to back up critical data. Perhaps that warning should have come before Harvey, but that is another post for another day. The point is that regular backups of business data are absolutely critical.
The IRS has thankfully granted tax relief to businesses in federally declared disaster areas as a result of the two hurricanes. Among the many reasons for the relief is the reality that some companies are going to have to completely rebuild their business records from scratch. The task will be significantly harder for companies that were not proactive in making backup copies of data.
Data should be backed up both electronically and in paper format. Forget about the promise of digitization eliminating the need for paper. Reality dictates that paper documents may be the only source of information when power grids and networks go down.
2. Insist on Fiduciary Bonds
Companies that contract payroll with third-party service providers should request proof of a fiduciary bond before any contracts are signed. Furthermore, the company should insist that a fiduciary bond be in place. If a payroll provider does not carry one, the client should look elsewhere for payroll services.
From a legal standpoint, the fiduciary bond is an insurance policy of sorts that protects a beneficiary or creditor against loss in the event of failure by the one with fiduciary responsibility. Payroll providers that carry fiduciary bonds are protecting their clients in the event they cannot meet their legal obligations. The fiduciary bond would be an immense help for any payroll service provider seriously impacted by Harvey or Irma.
3. Emergency Procedure Policies
Finally, the worst thing a company can do in the face of a pending disaster is attempt to act without any plan of attack. If nothing else, Harvey and Irma remind us that we must have emergency procedure policies in place long before emergency situations arises.
It is best for companies to figure out ahead of time how payroll will be processed in the event of an emergency. They need to have contingency funding in place to cover payroll, systems to process payroll in the event digital systems are not available, and the means to communicate with employees who are trying to manage their own finances under stressful conditions.
There is no way to prevent certain natural disasters from occurring. Events like Harvey and Irma are a normal and ongoing part of life on planet Earth. But when these sorts of things do occur, we need to learn from them so that we do not make the same mistakes in the future. Hopefully, the three payroll lessons discussed here will help aid you should any other natural disaster occur.