Debbie Time is money, and payroll is a big part of many business operations. However, the time spent managing paper-based paycheck processes could be better invested in scaling your company.
Using paper checks is an inefficient system involving numerous touchpoints—creating a large surface area for fraud and inefficiency.
Payroll Card
What is a pay card? Payroll cards are prepaid debit cards that allow employers to deposit employees’ earned wages directly onto the card rather than into an employee’s bank account or a paper check. They also provide a way for businesses to pay workers who cannot receive direct deposits or paper checks, such as the unbanked.
Employers can offer payroll cards to all employees, regardless of whether they have a checking account or not, and these cards typically don’t carry the same fees as traditional debit cards. Still, costs can add up, and it’s essential to read the fine print on any payroll card before agreeing to it. The CFPB’s prepaid rule requires financial institutions to give disclosures before an employee starts receiving payments on their payroll card, so employees can choose whether the card is right for them.
Another benefit of payroll cards is that they help employees save on check cashing and money order fees. Moreover, using their paychecks anywhere they can swipe or insert a credit or debit card makes these cards ideal for people who don’t have bank accounts and would otherwise have to pay third parties to cash their checks. For businesses, payroll cards reduce the time it takes to distribute and process paper checks and associated administrative costs.
Direct Deposit
One of the best ways to eliminate paper from your payroll process is to switch to direct deposit. This payment method automatically transfers employees’ earnings into their accounts via ACH. It’s more convenient for employees – they don’t have to wait for a paycheck in the mail or worry about losing or misplacing it – and it reduces the time it takes to process payroll, saving your organization money.
To set up direct deposit, your team must submit their banking information to your payroll service, which you’ll likely ask them to do during onboarding or when they join the company. Ensure you provide your team with enough lead time for this process so it can be ready to go by their payday. If you use this option, you’ll also want to check with your payroll processing service to ensure they can process payments on time.
Employees with access to their funds through direct deposit can align their recurring bill payments to when they get paid, which allows them to manage their finances better and achieve savings goals. Additionally, direct deposit is more secure than traditional checks because it doesn’t contain identifying information on a physical document. Plus, if your employees choose to change banks, they won’t have to complete new forms because their information will already be stored in your system.
ACH Transfers
If you have had your paycheck direct-deposited or paid a recurring bill automatically through your bank account, you’ve used ACH transfers. The Automated Clearing House network processes these electronic payments between banks, making them faster, easier, and more cost-effective than sending a check.
You can set up ACH payments to occur either as a deposit or a fee, depending on what you need:
ACH deposits take just hours to process and eliminate the time spent cutting checks and getting them in the mail. Using ACH payments also reduces the risk of error by eliminating manual handling. ACH transactions also typically have a lower fee structure than credit card payments, which can add up over a month.
For example, a company may pay its employees by ACH to save money on printing checks and envelopes. Or an individual may make a one-time ACH payment to pay for a product or service online without entering credit card details.
ACH Debit is an easy way to simplify payroll processing for businesses and consumers. By collecting payments via ACH, you can avoid the hassle of lost or stolen cards and eliminate costly chargebacks that can happen with credit card payments. Recurring ACH payments have a much lower failure rate than credit card payments and can help you increase customer retention.
Online Payments
Many employees can now receive their paychecks on a prepaid card. This digital payment method lets employers electronically load an employee’s wages or salary onto the card and allow them to save, spend, or withdraw their money as they would with a debit card. The employer can also transfer any reimbursements to the card, allowing for a more streamlined payroll process.
Online payments have become popular due to the coronavirus pandemic and the need to reduce cash transactions. Digital wallets, peer-to-peer cash apps, ACH, and debit cards are fast, secure, and convenient ways to send and receive money. In addition, these options allow less sensitive information to end up in the wrong hands – such as that scammer targeting paper cheques or payroll cards.
Regardless of the type of payroll payment your company chooses, offering employees multiple choices will benefit them. If you’re unsure which payroll solution is best for your business, speak with your employees and research service providers to find the right choice.
Traditional printed checks may still be widespread but costly for businesses. Many fees are associated with producing and distributing them, including processing and distribution costs and even a fee to cancel a lost or stolen check. Using electronic payments for your payroll will eliminate these fees and save you time and money.
