Six Steps to Crisis Management
Let’s say your organization manually tracks time and attendance for each employee. “Manual” suggests a long paper trail beginning with the employee writing down hours, then the manager reviewing the hours, and then a payroll clerk entering those hours into the payroll system. Not only is this is a green-unfriendly process, but it is also a time consuming and potentially inaccurate process. When tasks and processes are manual, there is a greater chance for error. In the world of payroll, the errors may be overtime calculations, incentive calculations, or data entered incorrectly.
When a major issue occurs, or crisis if you will, there are six basic steps to follow:
- Identify the extent of the issue
- Identify the team that will resolve the issue
- Communicate to everyone it affects as well as executives
- Resolve the issue
- Communicate the solution
- Identify how to prevent it from happening again
Now, how to use these steps in a real-world experience? Imagine on payday the payroll department (your department) is flooded with calls regarding overtime pay. Based on the number of calls, it is likely that nobody who worked overtime was paid correctly. This is a major issue on several fronts, from Fair Labor Standards Act (FLSA) compliance to the personal consequences of incorrectly paying employees. First step, you need to identify the extent of the issue. It appears as though nobody was paid correctly, but now you need to find out exactly who was affected.
Step two is to assign team members to resolve the issue. Since your department tracks time and labor manually, the payroll clerks responsible for entering the information should be responsible for rectifying the issue. These team members are most familiar with the data, so there is a better chance that they will find the issue and resolution quicker than someone who is unfamiliar with the data.
Step three is to communicate to all executives and everyone who was paid inaccurately. You need to be proactive in letting the employees know you are aware of the problem, and you are taking every step possible to resolve the issue. Taking ownership and responsibility will give your employees a sense of reassurance.
Resolving the issue is step four. The payroll clerks will have to find all the time cards with overtime hours and manually recalculate the overtime pay to comply with the FLSA overtime regulations. Based on the FLSA overtime regulations, overtime pay is calculated by using the average hourly rate for the employee that week. Then, each hour after 40 hours, is paid one-and-a-half times the average hourly rate. There are a lot of steps that are required when calculating overtime pay manually, which may be the root of the problem.
Step five is to communicate the resolution to all employees and executives. Let the employees know when the problem will be fixed and when they can expect to receive the corrected check. Being upfront, whether the outcome is what the employee wants to hear or not, is the best action. It gives you credibility with the employees, which is needed in a crisis, or potential crisis.
Step six is to find out how to prevent this from happening again. Looking back, how did this happen? Were timesheets late and there wasn’t enough time to calculate the time correctly, or in the rush did the clerks not notice the overtime hours? Did the clerks know how to properly calculate overtime pay? Or, did the managers not sign off on overtime pay? Did some of the employees work multiple positions, so the clerks didn’t realize the employee worked overtime between the two jobs? There are several reasons this could have happened, but how to prevent it? In today’s technology world, there is no need to manually track and calculate this important data.
A recent survey shows 73-percent of the employers polled rated their ability to manage compliance good to excellent, but the Department of Labor (DOL) audits and other research shows 48 to 75-percent of employers are not in compliance with some or all regulations. A time and attendance software system can automate and manage this process for employers to ensure accurate paychecks and maintaining compliance with the DOL. Non-compliance fines are paid out in the millions each year to the DOL.
The FLSA is the primary federal law that governs how employers manage wages and payments. This statute requires employers to correctly classify employees as exempt or non-exempt; accurately record an employee’s work time; and, pay employees for overtime work performed.
Are you ready to automate this process? What should you look for in time and attendance software? Make sure the software is set up with the proper processes and calculations to control and automate compliance. It helps if the software provider has consultants with the expertise to set this up.
If you can show your executives and employees how you will prevent this issue from happening again, you will gain their trust. Remember, it’s best to have a crisis plan in place before the crisis.
