At this point, we are all painfully aware that there are certain things we simply cannot control. From the pandemic to government shutdowns and the polar vortex of 2019, there are many situations from our not-so-distant past that have caused postal, business or bank delays. Unfortunately, this can mean that employees are stuck waiting for a paycheck to show up.
By moving from paper paychecks to an electronic payment method, businesses can give their employees peace of mind that they’ll be paid on time — no matter what.
In this article we’ll discuss two popular electronic payment options, as well as the many benefits that come from making the switch to electronic pay.
Electronic payment options
There are a variety of paperless payment options for employers to consider, two of which include direct deposit and payroll cards (aka “paycards”). Here’s a high-level overview of each:
- Direct deposit: Over 93% of U.S. workers are paid via direct deposit, making it the most popular payment option by far. Direct deposit allows you to transfer funds directly from your bank to an employee’s account using the Automated Clearing House (ACH) network. The ACH coordinates payments among each party’s financial institution, making it a safe and convenient way to pay — and be paid.
- Paycards: A newer and increasingly popular alternative to direct deposit, paycards provide an electronic payment option for primarily “unbanked employees,” (employees without a bank account). With paycards, you can deposit employees’ net wages directly into a paycard account on paydays (or even as an advance). Employees then have access to their account funds via a paycard, which they can use like a debit card to retrieve 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 foodservice, hospitality and agriculture tend to have higher percentages of unbanked employees, so paycards are a good option. Paycards are also a great solution if you want to offer employees the option for an advance on their pay. Before you make a decision on which payment type (or types) to offer, check with your bank on associated fees for each option and ask your employees which method they prefer.
Benefits of paperless pay
Both direct deposit and paycards have a bevy of short and long-term benefits for employees and employers alike. Here’s a few of the main reasons more and more business are saying goodbye to paper paychecks forever:
- Reliability: Electronic payments are automated, which reduces reliance on humans, banks and businesses to print, process, deliver, deposit, and pick up paychecks. By reducing the number of touchpoints involved with getting your employees paid, you’re mitigating risk and ensuring your employees get their money when they expect it.
- Efficiency: Employees save time since they don’t need to take their check to the bank or bother depositing checks electronically. Instead, their funds are just waiting for them on payday. Employers also free up time by avoiding manual paycheck processing each pay period.
- Reduced costs: Employees avoid check-cashing fees and employers save on expenses associated with paper checks, paycheck production, and lost or stolen checks. Although electronic pay methods may have associated fees, the overall cost is typically lower and more predictable.
- Security: Employees don’t need to stress about losing their paychecks since funds are automatically deposited into their accounts. Employers also eliminate fraud concerns, such as the cashing of lost or stolen checks.
- Financial planning: 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: Paperless pay doesn’t contribute to paper waste. Not only that, but it can eliminate trips to the bank, which means less gas consumption and carbon emissions. And who doesn’t like that?
Can employers require electronic payment?
As an employer, you’re responsible for paying your employees accurately and on time. 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. In other states, such as Illinois, it’s voluntary. Check your state laws to see if mandatory direct deposit is an option for your business.
Ready to move to an electronic payday?
Employers that already offer paperless pay options have taken the first step. However, there’s more to it. Encouraging — and in some cases requiring — employees to move to electronic pay might just be the next, best step for you and your workforce.
Already a client? Reach out to your client service representative (CSR), account executive (AE), or our general inquiry box. Whether you’re new to direct deposit, want to boost employee participation (hint: you’re one authorization form away), or are interested in one of our paycard offerings, we are here to help.
Not yet a client? We’re still here to help! Send us a note today to discuss your needs and learn about our electronic pay options.