It happens to nearly every company at some point... and for many, multiple times every year.  What is it?  Inclement weather that forces an office or plant closing.  In the North, the usual problem is snow or ice;  in coastal areas, it’s tropical storms;  in the Plains, floods and tornados.  Even in the relatively consistent climate of Southern California, there are occasional hazards such as torrential rain, mudslides and forest-fire smoke that can curtail business activity for some period.

Why is this a matter of concern for company management?  First, because unless ordered by a controlling governmental authority, senior management must make the call as to whether closing the office or plant is warranted, and for what interval of time.  This can be a gut-wrenching decision, and often must be made during what is normally personal time and on the basis of fairly sketchy information.

Second, having made the decision to close, you now face a thicket of regulations that govern pay practices in such circumstances.  Some of these are...

• If you close the office, you must pay exempt (salaried) employees for a full day of work;  but you are allowed to charge this time against their PTO bank.  However, if the business closes for a full workweek, exempts need not be paid at all (they are free to use vacation or other accrued time, if they have it). 
• If exempt employees cannot or are not willing to come to the office because of the weather, you are not required to pay them.  (As a practical matter, however, many employers pay them anyway, or allow employees to use available vacation or PTO to cover the absence.)  However, you are required to pay them for a full day if they show up for any portion of that day, even if you didn’t declare it to be a weather emergency. 
• You may dock the pay of hourly (non-exempt) employees for missed time, whether or not you had an emergency plant closing.

The confusion over exempt classification often leads to Department of Labor fines and class-action lawsuits.  Also, improper deductions from exempt employees’ pay – if not caught and reimbursed – can cause those employees to be reclassified as non-exempt, making them eligible for overtime pay ...including back pay for two or more years!

Your best defense is to ensure that your employees are correctly classified and that your company does nothing to jeopardize exempt employees’ status.  It’s also a good idea to review and publish your policies and practices, so that all of your employees understand how absences or closings due to bad weather will be handled from a payroll and attendance-tracking standpoint. 

Departures from routine – such as those caused by bad weather or other hazards – are an inescapable source of uncertainty and stress for employees and managers alike.  But with a bit of diligent care, you can minimize those effects and avoid unwanted collateral damage to your business.

Users of traditional payroll service providers (ADP and Paychex being two of the better-known examples) often literally don’t realize how much the service is costing them.

It’s common for these providers to charge on an a’ la carte basis for their services.  Which means that the only charge you’re likely to be really aware of is that big one, for the periodic payroll run.  So when you actually add up your charges for the year, you’re often taken aback to find separate, itemized charges for things such as...

• quarterly reporting
• check and report delivery
• check signing
• W-2s
• direct deposit
• extra pay runs
• support phone calls (that’s right: your vendor may charge you for the time it spends fixing even problems that it created!)
  ...even though many of those items are as much a part of “payroll” as the regular run itself.

Then there are a host of less tangible – but still very real – costs, such as:

• cost of resolving an error on an employee's paycheck caused by the payroll service provider (plus the likely cost of that same error occurring again, before the first one got fixed)
• cost in employee goodwill/loyalty of a late delivery, requiring employees to wait for their checks
• cost of time spent when employees question you about an old check, W-2 or vacation balance because they can't find the information for themselves
• time spent calling and calling your service provider to get problems resolved

This is the appeal of an Internet-based, “Software-as-a-Service” payroll service provider.  In some cases, you pay a single flat rate for access to all functions of the application, so your costs are level and very predictable.  In addition...

• the employee/hours/rate data used for payroll runs is totally under your control, not batched in and subject to key-entry errors;
• employees can access (authorized portions of) the same data, so they’ll rarely need your time to answer questions about old checks, W-2s or vacation time;
• you can print checks locally (if you wish), so there’s no such thing as a check/report delivery charge (never mind a late delivery);  and
• you can preview payroll prior to the regular run, greatly reducing the incidence of re-runs.  

We’ve looked at only the cost differences in this post;  in an earlier one, we outlined additional benefits of going with an online payroll service provider.  Hopefully, you’ll look carefully at all the dimensions before going with the provider type that’s best for you.  To make it even easier, we’ve also included a side-by-side comparison charts on our website.

So you’ve been studying the payroll service provider space and are leaning toward an online payroll service.  Well, congratulations! As I blogged about recently, I truly believe that for most SMB companies, Internet payroll solutions prove a better choice than either in-house application software or a traditional payroll processing service.

But now comes the hard part, because the criteria becomes finer-grained from here on.  In the remainder of this posting, I've assembled a checklist of items you can use to compare the offerings of the various providers you’re considering.  Not that there are “right or wrong” answers;  the point is to use the following criteria to pick the solution that represents the best fit to your situation:

• Design center.  Some services are tailored for companies under five employees, so they may be too slow or cumbersome to handle companies of your size and complexity. 
• History/legacy.  Some providers are traditional payroll processing service companies in disguise, having grafted a Web-ish front end onto a legacy batch application.  Their software isn't truly Web-based:  you have to install something on your desktop, you have to synchronize with a central server, payroll isn't calculated immediately for you to review.
• Flexibility.  How much can you control on your own?  Can you easily add new pay codes, departments, deduction codes, etc.?  Is the report writer real-time and easy to use?  Do you have the option of printing your checks locally?
• Full cost.  How will you be charged? ...per payroll run, or by the month?  Are there extra charges for such things as delivery, reporting, tax reporting, hiring/terminating employees, year-end processing (W-2s), direct deposits, etc.?
• Support.  Is it separately charged?  Is it provided by phone, as well as Web/email?  How do current clients rate the payroll service provider’s responsiveness?
• Application ownership.  Does this provider own the software that powers its service, or do they simply front-end another vendor’s software?  If the latter, you can probably expect significant wait times for enhancements and/or problem resolution.
• Breadth.  Do they provide for related HR functions such as HR newsletters, tracking of employee training and certifications, company property accountability and employee performance reviews?
• Expertise.  Can this vendor provide expert consulting services on HR issues beyond payroll, such as EEO and general labor law, training and development, hiring and promotion?

The right online payroll service can certainly be a boon to your productivity and your business.  Just make sure the one you chose is right for you.

When I talk to potential customers, at some point in the conversation I will be asked to answer the question “What’s in it for us?” ... or, more formally, characterize the benefits of an online payroll service to the inquirer.

I've actually found that the best answers to this question come from our own customers.  So here are some of the most frequent answers I've heard over the years;  you might call it a “Top Nine” list of the benefits of an internet payroll solution ...

1. I get to do things when I want, through a user-friendly payroll dashboard;  I don't have to conform to someone else's schedule or batch of rigid forms.
2. I can access my information (and therefore pay my people) anywhere there is an Internet connection.  The world doesn’t have to come to an end just because I’m on vacation or away on a business trip.
3. Because the system is truly online, I can preview my entire payroll before I actually run it.  This goes a long way toward eliminating embarrassing (and costly) errors.
4. I’ve set up our account so that our employees can access their own information (to the extent I’ve authorized).  Now I’m no longer indispensable to getting the answer to every routine question that comes up.
5. I control our firm’s payroll/HR information.  If a mistake occurs, there’s no need to search around for who’s responsible;  I can just focus on getting it fixed.
6. I can print my own checks locally, saving the cost of overnight shipping and the possibility of delay.
7. Knowing that the system is totally secure and frequently backed up gives me tremendous peace of mind, especially since I didn’t have to hire a whole IT department to achieve this.
8. According to our pre-purchase analysis, this approach was more cost-effective than either a traditional “black box” payroll service provider or acquiring application software and the expensive IT people to manage it.
9. It’s allowed us to “go green” by greatly reducing our reliance on paper.

A lot of growing companies are rethinking payroll performance, especially in consideration of today's economic environment. When you consider the control and convenience you gain with an online payroll service with built-in HR support, it's definitely worth looking into. If you’re thinking of doing your own comparison, you might want to check out the side-by-side comparison on our website.