CPA guidelines provide road map for keeping payroll going during crisis
When Alan Sinclair looks back on the massive power outage that struck Ontario, Quebec and much of the Eastern Seaboard of the United States a decade ago, he is proud of the emergency plan his organization had in place.
At the time, Sinclair was a payroll project leader at Ontario Power Generation (OPG) and had contributed to the business continuity plan OPG created should there ever be an incident that could halt business.
“As everyone was heading home in the afternoon, that’s when the power went out,” Sinclair recalls, adding it was a Thursday and payroll was scheduled to be completed the following day. “(The payroll department) had 24 staff who didn’t know what was going on. So, as part of the company’s business plan, our senior manager was contacted by his senior management and we were told, ‘Don’t go into the office... the office will not be open.”
According to the plan, Sinclair was in charge of informing the staff that answers to him about when business would resume.
“We had a staff contact list at home — myself and the other managers — so we contacted our staff and said, ‘Stay at home, don’t try to come into work and we’ll let you know whether we’ll be open on Monday for business or not,” he says.
The plan accounted for a day of missed business, so Sinclair and his team were confident of their ability to complete the administration of payroll on Monday after the power came back.
“By developing a plan like this, it forced us to look at our processes and get a better understanding of what the critical processes of the work were,” he says.
CPA payroll continuity plan guidelines
When Sinclair became the chair of the board of directors at the Canada Payroll Association (CPA) in 2006, the organization identified a need for guidelines to be developed for members who may have to ensure payroll continuity during an emergency that would interrupt business.
Sinclair’s experience with OPG made for perfect timing.
“A lot of businesses were doing business continuity planning and we felt it was important for payroll to be part of that plan,” he says. “In fact, if a business doesn’t have a business continuity plan, at least they should have one for payroll.”
This helps improve the profile of payroll within the business.
“It shows that the payroll manager is thinking about the impact of pay on the business,” he says.
Sinclair was charged with the task of chairing a task force made up of other CPA members to develop the guidelines.
“Most of them had developed some sort of payroll continuity plan for their companies, so we brought those plans together and used that as a basis or a talking point for developing the general guidelines for payroll practitioners.”
Dianne Winsor, a payroll manager with Bell Aliant in St. John’s, N.L., at the time, had just experienced a five-month labour dispute when she signed on to the CPA’s continuity guideline task force. Bell Aliant had a business continuity plan in place, but during the work interruption the organization realized there were areas in need of improvement.
“I don’t think anybody had gotten into doing a plan at the level it needed to be done,” she says.
The organization had to refine its plan in 2009 when there were concerns the swine flu could lead to a pandemic.
“Interestingly enough, payroll was identified as one of the top five functions that needed to be (operational),” she says. “With all the things that could happen during a pandemic, the one thing you could not fail on was making sure that people continued to be paid.”
Winsor and her colleagues turned to the CPA’s guidelines.
“We did exactly what the guidelines said,” she says. “We sat down and we actually prioritized what we needed to do.”
The guidelines suggest businesses categorize processes into the following:
• business critical — payment of approximation of net pay and benefits to employees
• business necessary — payments to third party providers
• business desirable — transfer of payroll data to the accounting system
• unnecessary — transfer of funds for the employee social club.
“We really had to sit back and dissect every single thing that we did and say, “Okay, what would be the impact if we didn’t do this for a month?” she says.
The CPA purposely made the guidelines somewhat open-ended.
“We wanted to make it generic enough that it would give people the opportunity to choose what specifics they wanted,” says Sinclair. “Certain parts might pertain more to certain types of businesses than others, but it’s a reasonably high set of guidelines that you can use as a basis for developing your own set of guidelines or business plan.”
Participants in the CPA’s payroll management course receive training on the guidelines.
CPA guidelines
Developing an organization’s payroll continuity plan
The guidelines developed by the Canadian Payroll Association (CPA) are intended “to assist the one-person payroll department... as well as to serve as a checklist for medium to large-sized organizations.”
The CPA’s guidelines were reviewed in two stages. First they were given to select members, payroll service providers and software organizations for initial reactions and revisions. The second draft was given to 260 of the CPA’s “subject matter experts” who provided feedback in early 2007.
The following is a selection of the elements the CPA recommends payroll professionals pay attention to:
Authorization
• If the payroll continuity plan is initiated by the payroll department, then both its development and the completed plan need to be explicitly supported by written authorization from senior management.
Scope
• The objectives of the continuity plan must be defined. The task force recommends that the best practice is payment of “an advance that is a close approximation of net pay” to each employee and/or pensioner. The previous net pay (or an average of four previous net pays if they vary significantly) is one suggested method.
Roles and responsibilities
• Payroll professionals should be designated as “critical” employees and be part of the organization’s emergency response team.
Service performance assessment
• An emergency tool kit list of vital materials must be available in print and electronically, on flash drive or CD, and be kept outside of the workplace. The list must contain the payroll continuity plan, the location of, or access to, equipment, tools, passwords or electronic keys required to implement the plan and the key contacts to whom results must be communicated.
Establish communications plan
• Create a “call tree” for activation of the plan and communication of plan status to key stakeholders and employee groups.
Implement testing, continuous improvement plan
• Test all the partial and complete interruption scenarios of the payroll and benefit processes including those that involve internal and external service providers and remuneration recipients.
Back up resources
• Backups of payroll processes and data could be stored out of province if the organization is located in an area that is at risk to certain natural disasters. Other offices, or those of a service provider’s in another province or region of the country, would minimize the inherent risk.
For more information about the continuity guidelines, visit the Canadian Payroll Association’s website at www.payroll.ca.
