Compensating displaced survivors of Hurricane Katrina has become a key concern for many employers in Gulf Coast locations.
To pay or not to pay . . . that was the question, but certainly not the only question, employers had post-Katrina.
In the wake of the hurricane's devastation of large swaths of coastal Louisiana, Mississippi and Alabama, employers of all sizes and industries had some serious soul-searching to do. Should -- or could -- they continue to pay employees whose lives were so horribly turned upside down? And how much and for how long?
They also had the logistical hurdle of getting the money to workers -- many of whom were scattered not just across the region, but across the country as well.
This, of course, followed the gut-wrenching search to find out if they had, in fact, survived.
"Once employees are found, and you've decided what to pay them, how you are going to pay them is a big challenge," says Scott Mezistrano, senior manager of government relations at the Washington-based American Payroll Association.
"You can send them a check, but where do you mail it to? . . . Can you use direct deposit? Maybe for employees who already had it, you can get in touch with them to see if it's still a viable means [of payment]. Of course, you need to make sure the employee's bank and your bank are still up and running," he says.
According to the APA, which based its estimates on Federal Emergency Management Association maps and Department of Labor Statistics, the latest (July 2) number of workers directly affected by Katrina's wrath was about 3 million -- 2 million in Louisiana, and a million in both Mississippi and Alabama.
"After locating employees, the first question is, 'Are employers going to continue to pay indefinitely?' as some employers are doing," says Mezistrano. "Others, mainly larger ones, are offering limited pay and a job at another location to any employee who has been displaced.
"Katrina points out the dire need for every business, if they didn't have one before, to have a disaster-recovery plan in place, especially one that protects payroll data," he says. "For example, what if your business was based in New Orleans and you lost all records that allowed you to process paychecks? You have to put a business continuity plan in place so, if you decide to pay people in an emergency, you have the option."
In Wal-Mart's case, the Bentonville, Ark., retail giant offered employees three days' wages. Displaced employees also are eligible for up to $1,000 from the Associate Disaster Relief Fund if their homes were flooded or destroyed, according to Wal-Mart spokesperson Dan Fogelman. Cash assistance of nearly $4 million has been provided so far to more than 6,100 associates through the Relief Fund.
As of mid-September, of the 126 Wal-Marts Katrina originally shut down, 15 stores and clubs remained closed. Overall, more than 34,000 Wal-Mart employees were displaced by Katrina's wrath. (At press time, the company had been able to contact 87 percent of its employees to verify that they are safe or have reported to work.)
Additionally, any displaced Wal-Mart employee can report for work at any U.S. Wal-Mart store. According to Fogelman, some employees are working in stores as far away as Alaska, California and Nevada, but most are in states near the disaster area such as Georgia, Texas and Florida.
Companies that decided to offer no wages, Mezistrano says, are probably ones that only have a single location destroyed by the massive storm and, as a result, have little or no revenue stream. He adds that the APA would like to survey affected companies in the future about the payroll decisions they made, but isn't sure APA members who decided not to continue compensation would participate, for obvious reasons.
"For those companies, they can make some disaster payments, a specific number of dollars to help employees out," he says, adding that employers should be aware that, according to the IRS guidelines, cash payments made to people in a "presidentially declared" disaster are not taxable.
Many companies are paying employees in full for a specific time. Defense contractor Northrop Grumman Corp., for example, extended full pay to its Gulf Coast workforce, both union and non-union employees, for two weeks, including the Labor Day holiday and the pay periods ended Sept. 2 and Sept. 9. Northrop Grumman also brought back to the region 400 of its electricians and maintenance workers to begin cleanup at its shipyards in Louisiana and Mississippi.
Those workers, says Brian Cullin, a Northrop spokesman, represent close to 2 percent of the 20,000 people normally employed at the Gulf Coast shipyards. Direct assistance to affected employees will be provided through a new Northrop employee disaster relief fund, established by the Northrop Grumman Foundation.
Isle of Capri Casinos Inc., based in Biloxi, Miss., chose to pay affected hourly workers for 90 days following the disaster, while salaried employees will be paid through April 2006 (the company hopes to rebuild its casino well before then). Both groups will receive full benefits as well.
Bill Kilduff, vice president and general manager, said Isle of Capri Casinos wanted to use direct deposit to get wages to its 1,150 affected workers (including 1,050 in the casino and 60 in the corporate headquarters), but many banking systems just weren't operational. So the company printed checks and Kilduff himself helped hand them out at designated locations in the days immediately after the storm.
"We were just trying to get money to people so they could just survive," Kilduff says. "Our first priority was to get people their checks, and of course the other was to get a head count to make sure everyone was OK."
Isle of Capri went through its entire employee list one by one, trying to contact each employee, but it wasn't easy. Employees who had found a place to stay needed to fax information into a central location, including a temporary mailing address, to receive their checks (if they couldn't pick them up in person).
"The devastation in downtown Biloxi was just horrific," Kilduff says. "Probably a third of the people I talked to just totally lost their whole houses . . . everything."
In addition to ongoing salaries, the company launched a disaster fund with $500,000. Employees can apply to the Isle of Capri Relief Fund either in person or online for assistance with items not covered by federal, state and local aid.
"Our people have been just so grateful to know that they're still going to get pay checks, and that we're here for them," says Kilduff, whose own house was damaged by Katrina.
Stein Mart, a Jacksonville, Fla.-based retail chain of 267 stores in 30 states, managed to successfully use its direct deposit system to get wages to the 500 or so affected employees, according to Hunt Hawkins, Stein Mart's vice president of human resources.
The chain, which had five stores still closed in mid-September, will pay its affected workforce for 90 days, including benefits. In addition, the chain is offering employees whose homes were damaged or destroyed a $1,000 gift card to use in any of its open stores.
After last year's busy hurricane season in Florida, Hawkins says, the company wanted to guarantee that every employee received pay in a post-disaster scenario. Earlier this year, it implemented 100 percent electronic payments, using a system from Ecount, of Conshohocken, Pa.
The system also paired each bank account with a Visa debit card, so employees could use those cards immediately rather than have to go to a bank to withdraw funds. There were a few kinks, but nothing that couldn't be fixed, Hawkins says.
"The banking system being down was a bit of an issue for a couple of associates, but we have generally been successful in getting them a pay card and eliminating that problem if they contacted us," he says.
Like Wal-Mart, Stein Mart also is offering work to displaced employees showing up at stores in places such as Kansas City, Mo., Houston and Savannah, Ga.
"There really wasn't any deep thinking that went into the decision to pay people for 90 days," says Hawkins, adding that Stein Mart employees can also seek financial relief through the company's nonprofit fund created specifically for Katrina-like situations. "It was just the right thing to do."
CNA, the Chicago-based insurer, is indefinitely providing full pay to its 65 employees based in the Mississippi, Alabama and Louisiana region. Through CNA's foundation, each affected employee can also receive up to $3,000 in a tax-free grant to cover immediate expenses.
"When the hurricane hit, the main thing was the safety and security of employees," says Lori Komstadius, the company's senior vice president and senior HR officer. "Apart from paying employees in full, we're not marking any time out of office as time off."
Locating the Banks
CNA, which also secured temporary housing for affected employees, turned to its Emergency Preparedness Committee even before Katrina struck. The day after the hurricane hit land, CNA worked with ADP, its payroll outsourcer, to determine every bank used by employees and retirees, and where checks were normally sent.
"We spent time making sure we didn't have employees who had money but couldn't get access to it," she adds. "We have emergency plans in place for every one of our locations. We work hard on emergency planning and practice it on a regular basis. It really paid off in this case."
In an e-mailed statement about its post-Katrina efforts, ADP says it has maintained recent payroll data, which helps employers reconstruct history and resume ongoing payroll processing in the affected region. In addition, ADP has extended its hours of operation for phone service and given clients access to its offices near the affected areas that can be used to transfer payroll information. Finally, ADP confirmed that all of the banks to which it sends direct-deposit information have processed most, if not all, transactions.
David Turner, president and CEO of W&O Supply, a nationwide supplier of pipes and valves for the maritime industry based in Jacksonville, Fla., says there was never any hesitation in making the decision about whether, or how long, to issue payments.
"We are paying our employees indefinitely and are doing other things to help," says Turner, noting that, between offices in New Orleans and Mobile, there were 19 W&O Supply employees affected (out of a total 165 in the company). "Having never dealt with a tragedy of these proportions, we were all in unchartered territory as to how best to deal with the situation. But we never considered anything other than continuing to pay people."
W&O Supply, which is privately held and owned by Pon Holdings, based in the Netherlands, has offices scattered in several U.S. coastal ports, Turner says. So the hurricane threat is always real. Yet, nothing prepared the company for Katrina.
"It took us 11 days to find all of our people, communications lines were so bad," he says. "Even with the best disaster plan, it was very difficult to find your people."
Apart from continuing paychecks, W&O Supply also gave employees an immediate $1,000 to handle basic needs. And the company will make additional contributions, depending on their damage. For example, one employee who wanted to continue working was relocated to a Houston hotel, right across from the company's office there.
Turner, who reports to the top management in the Netherlands, says he personally made that decision to continue paying people for both humanitarian and business reasons.
"We have some people down there who have been with us for 10 to 15 years, and we sure don't want to lose them," he says. "Also, right after I made the decision, I got an e-mail from the Netherlands saying, 'Spare no expense. Do what you have to do.' That was a good feeling. Being a private company, we can do what we want. And it's nice to have that flexibility."