Payroll 101: Getting Money To Your Employees
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Originally Posted On: https://valorpayrollsolutions.com/payroll-101-getting-money-to-your-employees/
Any business with employees needs a way to pay its employees. Employers may choose to pay their employees via check, direct deposit, pay cards, or even cash. The method of payment may often be determined by the limitations of the company’s payroll system. Payroll platforms that are outdated or less robust may not allow for all the options that other, more modern technologies might offer.
Paper checks are a very common method of payment and are what most employers will default to when processing payroll. Paper checks can be cashed at banks, check cashing facilities, and even certain supermarkets, which can be convenient for many workers, especially for those who may not have their own bank accounts. On the other hand, physical checks can easily be misplaced or accidentally destroyed, and some institutions may charge additional check-cashing fees for non-accountholders.
Pay cards are a relatively recent offering, and involve funds being deposited to an account that is accessible using a branded card at ATMs or for purchases – similar to a debit card. These cards usually can also be used to request cash advances from partner financial institutions. Pay cards are a great alternative to paper checks for employees who may not have bank accounts, and being able to load funds electronically means employees won’t need to wait in lines at the bank to cash their checks on payday. Pay cards are typically very easy to replace if they are ever lost or stolen. A downside to having a pay card can be accessibility to cash. There are still some businesses that deal with cash only, which means pay card holders will need to find a partner bank or in-network ATM to withdraw cash, or risk having to pay out-of-network fees to access their money.
Direct deposit is perhaps the most popular method of payment, for both employees and employers. With this method, funds are electronically deposited to employees’ bank accounts on payday, with the money being available for use immediately. Since deposits are made directly to employees’ existing bank accounts, there are no additional cards or accounts for employees to worry about, and with no physical checks or pay cards involved, there is very little risk of payment delays due to lost checks or misplaced pay cards. For businesses with a central payroll office paying employees in multiple states, this can be a huge benefit.
The advantages and ease of processing pay via direct deposit might have some employers considering making this their default method of payment, and require all employees to participate. Unfortunately, state laws dictate what the default method of payment can be, and the rules can vary depending on where the employee is located. Many states require paper checks to be the default method, with requirements to have employees opt-in to participate in alternative pay methods such as direct deposit or pay cards. Keeping up with each state’s requirements can be an additional burden on top of an already complicated payroll process. Let Valor Payroll Solutions help by leveraging our innovative digital solution and team of experts to take the stress out of your payroll process so you can focus on your business. Contact us today!