Direct deposit of employee payroll into workers’ bank accounts in lieu of issuing paper checks has advantages for both payers and payees. So great are the benefits of direct deposit that some employers no longer even offer their employees the option of receiving a paper check at all. Although some states’ labor laws don’t permit that kind of employer mandate of direct deposit, it’s such an overwhelmingly popular choice that about three-quarters of American workers opt for it anyway.
Surveys show that many, if not most, employees who don’t use direct deposit don’t have any objection to it – it’s simply not offered to them. They work for firms, often small businesses, that still haven’t recognized the savings in time, money, paper and even fuel that come with implementing a direct deposit program.
From an employer perspective, the benefits of direct deposit are fairly tangible:
- Savings of paper, ink and printing costs
- No outstanding checks to reconcile (and thus reduced accounting labor costs)
- Savings of processing and handling costs, estimated to be roughly $3 per paper paycheck
- Savings of time spent by employees taking breaks or longer lunchtimes to deposit or cash paychecks
NACHA, the national electronic payments association that administers the ACH Network through which money is moving electronically, estimates that even a business employing fewer than 100 people could save up to $19,000 per year by switching from paper checks to direct deposit. Statistically, small businesses are the least likely to be currently offering direct deposit, so the untapped potential for small business as a whole to realize savings – or for an individual small business to gain a competitive edge on its rivals – is great.
Selling employees on the idea of direct deposit shouldn’t be difficult, because in many ways the benefits to the employee are even greater than those to the employer:
- There’s no physical check to lose or to be accidentally damaged or stolen.
- Banks often waive fees for accounts that receive one or two direct deposits each month.
- No trip to the bank is necessary.
- Access to cash is immediate – often payroll is transferred early in the morning or immediately after midnight on payday. Combine that with the wide availability of online bill payment, and employees may be able to have their banking and personal finances taken care of before they even leave the house!
- Many companies deposit payroll one or even two days early when payday falls on a major holiday.
- Most direct deposit allows a paycheck to automatically be split among two or more checking and savings accounts.
For employees who like to have some paper record of their payroll deposit, a company can still issue paper pay stubs or vouchers with all pay information including current deductions and year-to-date totals listed. Or, to keep payroll management as paperless as possible, these stubs or vouchers can be issued to employees by e-mail.
Padgett Payroll Services can administer your small business’s complete payroll program, including direct deposit services for you and your employees at no extra cost. Call us today at (706) 548-1040 for a consultation to find out more about why Padgett should be your payroll processor.