Payroll on Point: How To Manage Payroll During a Disaster

In this post, based on the third episode of the Thomson Reuters podcast, Checkpoint Presents: Payroll on Point, the discussion is around how you can implement ways to secure data and manage payroll during a disaster, or better yet, make a plan ahead of the storms.

Are you prepared in case of a disaster?

Because news came out about Hurricane Dorian well before it reached the United States, the IRS had ample time to issue a news release to assist employers in  how to secure their pertinent data. If you take the time to set up a plan ahead of time to manage payroll during a disaster, along with securing tax documents,  and arming yourself with pertinent information about assistance efforts, your firm and clients will be much more prepared. The IRS provided some useful guidance to help you through any weather or disaster related event. If crisis strikes, it’s better to be prepared.

Does your payroll service provider have a fiduciary bond in place?

The IRS  also recommends that if you use a payroll service provider, contact that provider to see if they have a fiduciary bond in place. If the payroll provider should default, your payroll taxes would be protected by a fiduciary bond. Employers can always monitor payroll tax deposits on EFTPS.gov and sign up for alerts.

Taxpayers, whether individuals, organizations or businesses, should take time now to create or update their emergency plans to best manage payroll during a disaster, along with other core areas of business. If you or your business is hit by an unexpected event, the IRS is probably not the first thought, but you should stay in touch with the IRS after a disaster. If you wait until after the storm to try and manage a disaster plan, the damage may have already been done.

How to help employees during a disaster

You may want to assist your employees in the case of a disaster, and there are some tax considerations that go along with that help. If a disaster should strike, there are employee leave programs associated with paid leave including leave-based donation programs and banks where an employee who has unused leave donates the value of that leave and uses it to make a contribution to a charitable organization for that value. In this type of arrangement, the amount paid is not considered income.

The IRS also provides extended deadlines to file employment tax returns and penalty abatement during a disaster. Qualifying areas for tax relief may get updated frequently, so it’s a good idea to check the IRS disaster relief webpage for additional areas that may receive relief. Even if you’re not in a disaster area but your client is, the IRS may provide relief. Employers can contact the Disaster Assistance Hotline for information. State tax relief may be available as well.

Do employees get paid if they miss work during a disaster?

Beyond the tax and payroll considerations, there are the wage an hour and wage payment issues to consider. For nonexempt employees, you are only required to pay those employees for hours worked. Exempt employees are considered those who fall under the bona fide executive, administrative, and professional exemption.

Do employers have to pay the employee if they miss work or take leave?

Sometimes snow will also bring a city to its knees, crippling the trains and buses or making the roads tough for commuting. Often employees are told to use their own judgment about coming into the office. If you are open for business, and  an employee chooses not to go into the office, then the absence is considered taken for personal reasons. The DOL states that although you can deduct a full-day’s absence from the salary of an exempt employee, you cannot deduct less than a full-day’s absence if the employee is absent for one and half days. You may also need to consider when employees request leave that is associated with a disaster in the form of the Family and Medical Leave Act (FMLA). There are also state and local paid leave considerations. Some states have laws that require you to provide time off to employees under certain circumstances.

It’s important to be prepared on how to manage your sensitive data, payroll, and leave considerations during a disaster, just in case the unexpected happens. With a little research and work done ahead of time, you can weather the storms. Brace yourselves, winter is coming.

Top 10 Payroll Points

from Episode 3 of Payroll on Point

1. The DOL released the long-awaited final overtime rules. The rule raises the standard salary level for executive, administrative, and professional employees from $455 per week to $684 per week and allows 10% of the threshold to be met by nondiscretionary bonuses and incentive payments. Employers will be allowed to make a catch-up payment within one pay period of the end of the year or 52-week period. The highly compensated employee total annual compensation level increases from $100,000 to $107,432. The rule takes effect Jan. 1, 2020.
2. The Equal Employment Opportunity Commission has announced that while the deadline for Component 2 data collection was September 30^th, employers who have not yet submitted the data may do so. The collection portal will remain open until the response rate reaches the court ordered target of 72.7%. As of September 25, only 39.7% of eligible filers have submitted Component 2 data. In related news, the EEOC will not be seeking to renew Component 2 data collection in the future
3. The IRS issued the high-low simplified per diem rates that took effect October 1. The high-cost area per diem rate is $297. The notice included a number of locality changes, removals and adjustments.
4. The minimum wage for federal contractors will increase to $10.80 per hour and $7.55 per hour for tipped employees for 2020.
5. The DOL recently released three opinion letters regarding FMLA leave and collective bargaining agreements, the FLSA exemption for retail/service employees paid by commission, and whether HSA employer contributions are earnings subject to garnishment.
6. The Department of Homeland Security is proposing a $10 fee for employers petitioning H-1B visas for each electronic registration they submit to U.S. Citizenship and Immigration Services (USCIS).
7. The IRS has released a number of timely publications including Publication 1220 which contains the electronic filing specifications for the 1099 series and other forms, Publication 5164 for the electronic filing of ACA information returns, and Publication 1187 containing the electronic filing specifications for filing Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The pubs may be relied on for the 2019 tax year.
8. The DOL has announced the final rule to modernize the recruitment an employer must conduct with an H-2A application. The final rule rescinds the employer requirement to advertise jobs in a print newspaper and replaces it with a requirement to post an electronic advertisement on a website. The rule is effective October 21^st.
9. The IRS has announced that the W-2 verification code program that began in the 2016 filing season will be discontinued. Box 9 of the 2019 W-2 has been shaded out. The IRS noted the program was no longer necessary  because of new wage and income reporting requirements. Federal law now requires employers to submit W-2 forms by January 31 each year. The IRS said that this helps to combat fraud and identity theft and superseded the need for a verification code.
10. Finally, around the nation, we have some minimum wage updates. Effective October 1^st, Connecticut’s minimum wage increases to $11 per hour and Delaware increases to $9.25 per hour. Alaska and Montana announced their 2020 minimum wage increases. Alaska increases to $10.19 per hour and Montana increases to $8.65 per hour.