Best practices would see both sides work as a team
Unfortunately it’s not an unfamiliar story: A manager calls a group of employees into a room to tell them there has been a layoff.
“They’ll say the 10 people that you don’t see standing here right now are being released,” said Cheryl Ball, a payroll consultant, with Canadian Payroll Association in Toronto. Ball has been in this situation while working as payroll manager prior to joining the association.
The news is not only as disheartening for payroll as it is for other staff, it also means a very, very busy week ahead for the department.
“I’m standing there as a payroll manager going: Oh no, great. I have to go back to my desk now and start working on these 10 terminations.”
Terminations can be a nightmare for payroll if they aren’t consulted earlier in the process than they usually are.
“I don’t want to be involved in the budget... I don’t want to go back that far,” said Ball. “Now what often happens in budgets is they start to determine who is really going to be terminated and that poor person who is seeing all those names gets very stressed.”
But Ball and other experts recommend payroll talk to HR and ask to be involved in the process before layoffs are announced to the general employee base.
It’s strongly recommended there be a standardization of the company’s termination letters.
If the terminology in a termination letter — which is usually written by HR under the guidance of legal council — isn’t the wording the Canada Revenue Agency, Revenu Québec and Employment Standards requires, it can be a legal issue for the company.
“You need to make sure the HR person is aware and understands what the legislative requirements are for payroll,” said Annie Chong, manager of the payroll consulting group at Carswell, a Thomson Reuters business. “It’s one thing for the payroll person to say, ‘we’re going to pay you XYZ,’ Payroll needs to understand what XYZ looks like.”
The wrong terminology can mean the continuation of an employment relationship after a termination, which can be a major issue for a company. If an employee is still receiving credits towards her company pension plan for a period of time after a termination then the employment relationship is considered continued.
If something happens to the employee in that period the company could be on the hook for long-term disability benefits.
When a termination is going to take place, it would be best for payroll to know prior to the layoff so they can assist HR with making the proper calculations to ensure payments are in line with employment standards.
“I’d like to know, as the letter’s being written, so I can have some input on the dollars,” said Ball.
HR should be made aware that payroll can confirm the amount is correct, because once hard numbers are listed in a letter they have to be paid, she said.
“We don’t want to promote litigation,” Ball said.
If HR contacts payroll when the termination process begins, the two groups should be discussing specific payouts, including vacation, any overtime or banked hours, any sick banked days that may be available to the employee and outstanding commissions, said Ball.
If a signing bonus was given to an employee and terms of the bonus were not met then the company may have to look at repayment options, she said.
HR should know that privacy before a layoff won’t be an issue when dealing with payroll, said Juliet Francis, consultant and payroll instructor at Humber College in Toronto.
It’s important that payroll knows how long the employee has been with the company and what the reason for termination is, said Francis
But even without giving names, if payroll is made aware when the employee is being terminated and the number of years the person has been there, it really saves a lot of hassles, she said.
Not disclosing all the information is a decision companies can make, but it may not be necessary to withhold information from a department like payroll, said Chong.
Payroll already handles sensitive information so privacy shouldn’t be a problem if the two sides are working together, she said.
“It shouldn’t be an issue because payroll knows what everybody makes,” said Chong. “What’s important is to make sure that they are working closely together and the package they are presenting to the employee has to meet the terminologies that are recognized by payroll and the government agencies.
Meeting with HR to talk about terminations before decisions are even made to have layoffs is a good best practice.
Sharing the information about a termination after the fact creates problems for payroll and this should be communicated to HR if its an ongoing issue.
“You’ve already, in HR, negotiated the settlement with the employee, not realizing what the direct impact is for payroll,” said Chong.
“I would rather see an organization work collectively together and put together what that package should look like and then present it to the employee,” she said.
Francis agrees.
“They’re all part of the same company and their end goal is to make sure... the company is compliant,” Francis said. “If there is a head’s up given, it just makes everything run smoother.”
