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Payroll Must Act to Manage COVID-19 Impact

By Marc-Oliver Fiedler

 

CoronaThe new coronavirus, COVID-19, is the worst deadly virus outbreak in many decades. As of April 1, 2020, more than 850,000 people had been infected in more than 100 countries and more than 42,000 people had died from the virus, making it far deadlier than the Ebola, SARS, MERS, and H1N1 outbreaks over the past years. Much uncertainty remains on how the virus will further spread and how many lives will be affected. What we do know is that it has already caused major disruption to personal lives and businesses around the world.

In China and Italy, for example, millions of people have been quarantined and are restricted in their movements. In Seattle, one of the U.S. cities with the highest number of infections, companies like Microsoft, Amazon, Google, Salesforce, and many other tech giants are asking their employees to not come into the office and to work from home instead out of fear of potential contagion and further spread of the deadly virus.

Clearly, we are living in uncertain times, and we must adjust our daily routines in the face of this global health emergency. In order to avoid a complete collapse of the global economic system, it is critical that we all prepare and develop contingency plans.

As we know, payroll is part of the lifeblood of any business. While payroll often operates unseen behind the scenes, it is absolutely mission critical to the smooth operations of any business. If you do not pay your employees on time and correctly, you will soon be facing dire consequences: disgruntled, unmotivated employees and serious fines from tax and social security offices. So, it is critical to keep payroll running as efficiently as possible, even in times of global crises like the one we are facing right now.

So, what does the current crisis mean specifically for global payroll, what are the risks you may be facing, and what can you do to mitigate the potential impact? Let’s look at some of the key scenarios that you may encounter as a global payroll leader over the coming weeks and months and how you can prepare yourself.

Office Closure, Work from Home

One of the most likely scenarios is that your company may close offices to avoid the further risk of contagion and ask employees to work from home. This scenario is very real as we have already seen a number of employers instituting this kind of policy at least in parts of their organizations. So, what are the implications for payroll?

The first question to ask is: Can you operate your payrolls remotely? Your HR and payroll employees will need to be able to access systems and data from their homes. While digital workflows and cloud-based solutions generally bear many benefits in terms of efficiency and central governance, they are absolutely indispensable in crisis situations like this. So specifically, what you should have in place are the following:

  • Digital workflows so your processes do not depend on local, human interactions (for example, a payroll calendar or other key to-do lists written up on the whiteboard in the office won’t do you any good when the team is working remotely from home)
  • Documents and data stored securely in a central cloud environment so all team members can access crucial information anytime, anywhere
  • Digital means of distribution for pay slips and payments to employees as much as feasible given local country infrastructures

If you have not fully digitized your global payroll environment yet–including payroll operations in smaller remote countries–the current crisis should give your organization the impetus to do so as quickly as possible.

Sick Leave, Shortage of Staff

Of course, as the health crisis spreads and more people contract the virus, you may have members of your team who need to go out on sick leave and you will have to find ways to cover their responsibilities. And in a severe crisis like the current one, even normal local backups may not be available to step in when the primary payroll owner is out sick. Given payroll’s very country-specific nature, it will be difficult to have someone from your broader global team unavailable to try to cover the payroll in another country. However, if you have standardized your payroll processes and tools in a way that each country is following the same fundamental steps and uses the same tools to collect, compare, and sign off on the monthly payroll data, you will have a much better chance of having someone else on your team be able to step in on an emergency basis and at least make sure that payroll does not come to a grinding halt. So standardizing processes and tools across different countries will serve to reduce people risk and single points of failure in your payroll organization.

External Provider Risk

Another potential risk to your payroll operation’s business continuity may come from outside of your organization, which in many ways is beyond your immediate control. Your local payroll partners may get hit by business continuity challenges, either because their staff is impacted by the disease or because their overall business ends up in a financial crisis (such as bankruptcy) because of delayed or cancelled contracts, disrupted supply chains, or difficulties securing necessary funding. In this case, you need to be able to switch to a new local vendor quickly to ensure you can continue to rely on professional experts to get your employees paid correctly and on time. Of course, any switch in a payroll vendor is not trivial. However, you can ease the pain and potential disruption by doing the following:

  • Establish well-documented, standard operating procedures–ideally in the form of processes that have been codified in digital workflows–with your local providers
  • Capture all data exchange between you and your local payroll partners in an easily accessible document and reporting cloud so you can readily make all the required information available to a new payroll provider in case you have to make a transition

Increased Burden on Your Team

While normal business operations for payroll may be impacted, the global crisis is already creating exceptional conditions that put more burden on payroll professionals. In order to protect employees from financial hardship as they protect themselves and their colleagues by calling in sick to self-isolate themselves, the U.K. government is in the process of instituting an emergency measure that will entitle employees to full statutory sick pay from the first day of sick leave instead of from the fourth day under the current rule. The U.S. Treasury Department, Internal Revenue Service (IRS), and Department of Labor (DOL) announced plans to allow small and midsize employers to begin claiming two new refundable payroll tax credits, designed to immediately and fully reimburse them for the cost of providing COVID-19-related leave to their employees [IR-2020-57, 3-20-20]. The agencies are moving swiftly to implement the Families First Coronavirus Response Act (Pub. L. 116-127), which was signed into U.S. law on March 18, 2020.

Other countries are implementing similar federal legislation and aid programs that affect payroll. Payroll departments will need to scramble to effectively reflect the new rules in their payroll calculations. In some cases, manual overrides of the system in use may be necessary to properly account for the new rules.

In summary, we are living in disquieting times. But whether at a personal or professional level, we must make sure we prepare ourselves for potential contingencies and risks so we can mitigate the impact of the crisis on our daily lives. In the case of global payroll, for organizations that have not yet standardized and digitized their global workflows and centralized their document and data management in a secure cloud-based environment, the current crisis should serve as a stark reminder that it is high time to move their payroll operations into the 21st century.

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Marc-OliverFiedler

Marc-Oliver Fiedler is the Founder and CEO of Payzaar, a startup transforming the global payroll space with an innovative open marketplace platform. Fiedler has more than 15 years of international experience with leading technology and software providers, building innovative cloud-based solutions for enterprise clients. Prior to launching Payzaar, he was Head of Strategy, Marketing & Product Management at ADP International. Fiedler previously held global leadership roles at Oracle and Hewlett-Packard and worked as a management consultant with The Boston Consulting Company.