With many companies paying as much as $50 per employee per month, payroll costs are through the roof in just about every industry. If you’re trying to decide whether to pay by check or to give your employees direct deposit, you could be talking about a big difference in fees. Deciding between the two requires balancing your own pay sheets as well as considering what would be good for your employees.
Here is everything you need to know about how you should be paying your employees.
Why Use Direct Deposit
Thanks to contemporary banking technology, direct deposit has become safer than ever. When you use direct deposit, your employees will benefit from quick payment at the same time every week. You’ll also benefit from being able to save on costs to print up checks on a regular basis.
Employees love the ability to never worry about a stolen check ever again. Even one that gets misplaced or goes through the laundry can be a serious headache that no one wants to deal with.
Trips to the bank can be cut way down for both you and your employees when their money is deposited directly into their account. And without having to wait in long lines or go way out of their way to find an ATM, they’ll have more time free to relax after work. Even if they were to normally get paid on a holiday, direct deposit will usually allow employees to get paid on time or even early.
If payday falls on their day off, your employees won’t have to worry about whether or not they can have access to their money. It’ll arrive overnight and be ready to pay bills or go on vacation the next day.
Direct deposit also allows for split deposits, so money can be automatically put into a savings account or paid to a bill, like a department store credit cards. Rather than having to make all kinds of complex transactions or having to shift money around online or over the phone, it can all be done automatically.
Why Direct Deposit Might Not Be Right
In order to get direct deposit, your employees will need to give you their banking information. Some people don’t like giving that much personal information to their employer without being able to keep track of it. Additionally, many people might not qualify for a bank account, which could keep them from using direct deposit.
If employees have a complicated immigration status, they will be required to pay state and federal taxes on their income, even if they can’t get a bank account. Rather than limit your payment only to direct deposit, if you anticipate employing people who might have hurdles, direct deposit might hurt their ability to get paid.
In recent years, banks have created payroll cards that automatically fill up once paychecks are sent. The downside to these is that there is usually a fee attached that can come down hard on people with limited means. Rather than dealing with bank charges that could cut into paychecks in a big way, employees might want another option.
People who struggle to manage their funds or work part-time might also have trouble with direct deposit. If an employee miscalculates their funds, they could get hit will fee after fee until they spend their whole next check just to get back to zero.
What’s Good About Paper Checks
Paper checks might seem outdated but they have their upsides. They allow employees to keep their banking information private, which is valuable to people with privacy concerns. When they have their paychecks in their hand, they can manage when they’ll have money in their pocket.
Without a bank account, there’s never any worry about surprise bank fees.
If your employees don’t want friends or family knowing how much they are earning, having a paper check leaves no trail behind. Checks can be cashed before going to a bank and no receipts will be found.
If an employee has a joint checking account with a loved one, they won’t have to deposit their entire check. Since they are the only person who can manage their check or cash it, they have 100% control over who knows about their finances.
Downsides of a Paper Check
WIth a paper check, you might have to worry about having it stolen or it getting damaged. Paper checks that are difficult to read or hard for bank machines to scan due to age or wear could give your employees issues.
Replacing a paper check is a pain and could take weeks, if not months.
If a holiday comes up, paper checks can be a headache. Finding a place to cash one on a Sunday could be hard enough, let alone during the holidays when you need money the most.
If you’re sick or out of town during payday, employees will struggle with a tight budget until they get back into town to cash their checks. Multiple trips to work and to the bank mean a loss of time and a loss of money.
On top of everything, employees might only be able to cash their checks at the financial institution they’re issued from. If there isn’t one nearby, the other option is a currency exchange, which can take a massive bite out of their earnings.
Whether You Pay By Check or Not, Always Pay On Time
Even if you choose not to pay by check, you need to give your employees a hard date for when they’ll be paid and stick to it. When you break up your payroll schedule, you can break up their spirit and make it hard for employees to have faith in their workplace. When they lose their morale, they won’t perform as well and could mistrust you as an employer.
If you need help calculating your payroll each month, check out the tools that we have to offer.