Payroll Data Services Blog

Why It’s Time to Say Goodbye to Paper Checks


Although spring is here, if you’re in the Midwest, Northern Plains or even parts of the Northeast, you're still painfully aware of the term “polar vortex.” Thanks to this winter’s record-shattering temperatures, the USPS delayed mail delivery in 11 states. Unfortunately, if your employees had a payday during the delay and they rely on paper checks, they would’ve gotten paid late.

On the other hand, if your employees swap paper checks for an electronic payment, they’d get the reliability they need without the added stress. In this article, we’ll discuss two electronic payment options, direct deposit and payroll cards (aka paycards), and why they may be right for your employees and you. And, even with winter days behind us, now's an opportune time to encourage employees to sign up for electronic payments so (rain, snow or shine) they won't miss any future paydays.

Direct deposit vs. paycards

Before we explore the benefits of both, here’s a high-level overview of each option:

  • Direct deposit: Over 90 percent of employees are paid via direct deposit, making it the most widely used payment option by far. Direct deposit allows you to transfer funds directly from your bank account to your employees’ bank accounts using the Automated Clearing House (ACH) network. The ACH coordinates payments among financial institutions. On paydays, employees receive funds via direct deposit, and their account balance automatically increases.   
  • Paycards: A newer and increasingly popular alternative to direct deposit, paycards provide an electronic payment option for “unbanked employees” (employees without a bank account). With paycards, you can deposit employees’ net wages directly into a paycard account on paydays. Employees have access to their account funds with a prepaid card, which they can use like a debit card to get cash, make purchases and pay bills.

Direct deposit is more popular, but depending on your industry, it may make more sense to offer paycards. Some industries, such as food service, hospitality and agriculture tend to have higher percentages of unbanked employees, so paycards are a good option. Before you make a decision on which payment form to offer, check with your bank on associated fees for each option and ask your employees which method they prefer.

Electronic payment benefits

While reliability is a fundamental benefit of electronic payments, direct deposit and paycards offer employers and employees additional perks, including:

  • Efficiency. Employees save time since they don’t need to take their check to the bank and wait for available funds. Instead, their funds are ready automatically on payday. Employers free up time by avoiding manual paycheck processing each pay period.
  • Reduced costs. Employees eliminate check cashing fees and employers avoid expenses associated with paper checks, paycheck production and lost or stolen checks. Although direct deposit and paycards may have associated fees, the overall cost is typically lower and more predictable.
  • Protection. Employees don’t need to worry about losing their paychecks since funds are automatically deposited into their accounts; employers eliminate concerns of fraudulent cashing of duplicate checks in the event of a lost or stolen check.
  • Financial management. With direct deposit, employees can set aside a predetermined amount for checking and savings. Some employees with bank accounts will still use paycards exclusively for spending money, and they’ll deposit the rest of their money into their traditional bank account for bills and savings.
  • Eco-friendly. Since both options are paperless, they don’t contribute to paper waste. Not only that, but they eliminate trips to the bank, which means they’re saving gas.

Can employers require electronic payment?

As an employer, you’re responsible for paying your employees accurately and on time. On top of the other benefits they offer, both direct deposit and paycards are reliable payment methods, especially if the dreaded polar vortex strikes again. Considering this, you may want to transition all employees to an electronic payment method. In some states, employers can make direct deposit mandatory for their employers. If you’re in Wisconsin, for example, you can mandate direct deposit if you comply with specific state guidelines. Check your state law to see if mandatory direct deposit is an option for your business.

Make payment a piece of cake.

By setting up an electronic payment option for your employees, you can make payment quick, cost-effective and reliable for you and your employees. We’re here to make that process as easy as possible, so you have more time to focus on your business. If you’re already a Payroll Data client, and you’ve decided to set up direct deposit, encourage your employees to sign up by providing them with this authorization form. If you’re interested in paycards, we partner with SOLE Financial to offer this service. For more information, contact your client service representative (CSR) or send us a note today!

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