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When companies outsource their payroll, they expect the supplier will pay their employees on time every payday. But what do outsourcers do when the employer can't deposit the payroll funds in the bank?

That was the dilemma Ceridian Canada faced the first week in June due to a computer glitch at the Royal Bank of Canada. On Monday, May 31, 2004 the bank's IT department launched a routine programming update. An internal quality-control inspection found a flaw in the upgrade, which forced the bank to shut down its retail banking system, which tracks withdrawals and deposits. Although the system was down for just one day to correct the flaw, it took a week for the same computer system to work through the backlog at the bank, Canada's largest with about 10 million accounts.

That meant employers could not deposit their payrolls and employees could not withdraw their money that was supposed to be deposited directly into their accounts. On June 3, for example, 62,000 Ontario and 10,000 New Brunswick government workers discovered they had no paychecks deposited in their accounts. For some, it took up to four days to gain access to their wages.

However, employees of companies who had outsourced to Ceridian had another option that saved them these difficulties. Ceridian Canada handles payrolls for 40,000 Canadian firms, reports John Cardella, executive vice president in charge of HR. He says Ceridian already had a backup plan for such emergencies "because the last thing our customers want is a surprise on payday."

So in an effort to help employees get access to funds, Ceridian worked with Royal Bank which agreed to treat a Ceridian pay stub as cash. Cardella estimates that 133,000 individuals who bank with Royal and are paid via Ceridian were able to get their funds when other bank customers had to wait.

This was the second time Ceridian Canada had to scurry to produce paychecks during a disaster. The company's Markham, Ontario office was without power on August 14, 2002 during the power blackout caused by a transmission failure in Ohio. Because Ceridian has backup generators; its uninterrupted power supply allowed it to pay its customers' employees "accurately and on time," the executive reports. Truly remarkable during a blackout!

"We live in a world where anything can happen at any time. As an outsourcer, we have to be ready," Cardella says.

Publish Date: September 2004

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Copyright © 2004 - Everest Partners, L.P.

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