Should My Business Transition Employees to Direct Deposit?

As electronic payroll delivery becomes the rule rather than the exception for companies large and small, your bank is a good resource for learning more about how to get your pay employees to shift to direct deposit.

What is direct deposit? Basically, it's an automated transfer of funds (Automatic Clearing House, or ACH, transaction) from one place to the other. Direct deposit and payroll cards for employees without traditional banking services can be a safer, smarter, and greener option for payroll for both business and employee alike.

According to the Association for Financial Professionals 2010 Payments Fraud Survey, check fraud is the number-one type of payments fraud. In eliminating the paper paycheck, an employer ensures safe receipt of pay and the employee is protected against stolen or lost checks.

The AFP survey also noted that electronic payroll provides a cost-effective payroll solution. Employers save anywhere from $2.87 to $3.15 per payment by using direct deposit instead of paper checks. That savings translates to nearly $19,000 a year for a company with 100 employees, and $5.7 million per year for an organization of 30,000.

Direct Deposit Saves Businesses Time and Money

From the perspective of your administrative staff, direct deposit can save your company time and money by reducing banking charges and eliminating the need to distribute paychecks on time. By transitioning all employees to direct deposit and payroll cards, as well as implementing electronic distribution of pay stubs, your company will glean significant cost savings, efficiency, and simplified payroll procedures.

Employees can also benefit significantly by using electronic payroll options. Electronic payroll provides them ease of use, savings in time and fees, increased security, immediate access to the payment, and certainty around the payment. In fact, 97 percent of those who use direct deposit are reportedly very satisfied with it. Employees also say that the payroll card offers increased convenience over paper check options, providing them with a way to receive their pay without having to go somewhere to cash a check. Payroll cards bring the benefits of electronic wage payment to employees without bank accounts who could not otherwise participate in direct deposit.

Additionally, payments made by direct deposit cannot be "lost." Problems with paper checks may take up to three weeks to resolve. Direct deposit saves employees time because they don't have to go to the bank to deposit checks. Employees don't have to be in town for their money to be securely deposited into their account. With direct deposit, there's no waiting for a check to clear, allowing the employee to access the money one to four days earlier than they could a physically deposited paycheck.

Here's a breakdown of the main benefits your employees will get from direct deposit:

• There's no waiting for checks to clear once the funds are direct-deposited into a checking, savings, or money market account.
• Funds are now available on payday, including via an employee's ATM card.
• It's safe and confidential.
• There's no waiting in line at the bank.
• Direct deposits cannot be lost.
• Direct deposit can include perks such as a free checking account.
• Employees have access to pay when out of town on payday.
• Electronic delivery of paystub: Employees can choose to get an e-mail alerting them that the paystub is available to view and print.

Less time at the bank, immediate access to funds, and guaranteed receipt of funds make direct deposit and payroll cards intelligent, safe solutions for your business and your employees.