COVID-19 is changing payroll. With dozens of modifications and compliance considerations including paid and unpaid sick or family leave, compensation for quarantined employees, salary/wage adjustments, furloughed employees, final paychecks, paycheck deductions, payroll tax withholding, and reporting — payroll just got a lot more complicated. It got us thinking that robust, up-to-date, living payroll software, like Sage 100cloud Payroll, Sage HRMS Payroll, or Workforce Go! HCM, could be one of your business’s best friends during these times.
Here’s a quick look of some of the new payroll complications your business may be facing, plus some ideas about how to prepare your organization for critical payroll business continuity.
Families First Coronavirus Response Act
The Families First Coronavirus Response Act (FFCRA) was passed by Congress on March 19, 2020. This act, which includes the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act took effect in the U.S. on April 1, 2020, and included multiple, significant changes to the way employers process payroll. In last month’s newsletter, we highlighted the changes Sage has made available in a program update for Sage 100 Payroll 2.20.1 to comply with the requirements of the Act.
President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020. While most of the law provides economic help for businesses, it also offers relief options for participants of 401(k) retirement plans and Individual Retirement Accounts (IRAs) which could impact your payroll processing, including:
- Enhanced loan availability and relief for outstanding loan repayments
- COVID-related distributions and waived early withdrawal penalty
- Waived Required Minimum Distribution (RMD) for the 2020 calendar year
Sage recently published an informative blog post on this topic — read it here.
Even in our current situation of the global coronavirus pandemic, many employer responsibilities continue nearly unaffected. One of those is the requirement to properly process wage garnishments. This duty cannot be ignored because compliance failures can result in an employer becoming liable for an employee’s entire debt (yikes!).
While federal student loan garnishments have been put on pause pursuant to a U.S. Department of Education (DOE) directive effective March 13, 2020, other garnishments — such as child support orders — remain in effect. Tax levies present another set of challenges, as they depend on the jurisdiction. Some states have paused collections while others have not. It’s vital to have a flexible and agile payroll application that can adapt to these changes.
With stay at home orders in place across most states, employers may find themselves with an additional challenge — nexus. If the state an employee is now telecommuting from is different from the normal work state, it would typically create nexus for the employer and requires the employer to withhold income taxes for that state. Several states have issued guidance or passed laws relaxing these requirements temporarily.
EY recently published an article, COVID-19 and global payroll business continuity, which includes seven areas worthy of consideration. We think it’s helpful to share them here as a guide to work toward payroll business continuity. And remember, our consulting team is a great resource for working through many of these considerations.
1) Payroll organization
- Who is responsible for performing payroll activities in each location?
- What are the key activities and how are they performed?
- Are there effective business continuity plans in place for all locations, either in-house or third-party providers?
2) Staff availability
- What percentage of payroll staff or their direct family members might be affected?
- What is the anticipated impact in cases of limited staff availability when considering care responsibilities?
- Has overtime been factored into working arrangements?
3) Working from home arrangements
- Are the key HR, payroll and Finance personnel correctly equipped to work from home (i.e. use of a laptop, internet with adequate bandwidth, remote access to key applications, an additional monitor where necessary)?
- Does the home working scenario account for data confidentiality?
- Is the work environment suitable?
4) IT infrastructure
- What are the key technical vulnerabilities or weaknesses?
- Are HR/payroll source systems (remotely) accessible?
- Can all payroll inputs be received on time?
- Is the IT infrastructure secure?
5) Physical processes
- What physical processes exist in the payroll value chain (such as physical filings, signings)?
- In the case of limited or no physical access, how will impacts be mitigated?
6) Access to payroll data
- Are last month’s payment files, pay-slips, pay register and general ledger files readily available?
- Is (remote) access guaranteed and secured?
7) Releasing bank payments
- Is (remote) access guaranteed to release bank payments?
- What is the process for authorizing exceptional payment procedures?
It’s vital to get it right
Payroll is one of the most vital functions in any business — and current global health crisis has significantly complicated this function for thousands of companies. Are you using a comprehensive payroll management solution? If so, you can remain confident that the publisher will keep the software updated to ensure continuing compliance. If you are not yet using Sage 100cloud Payroll, Sage HRMS, or Workforce Go! HCM, and would like more information about the solution’s value during this time — and beyond — please get in touch. As you know, the situation is changing rapidly and remains complex, so please be certain to consult with a business or tax professional before making changes to your payroll processes.