Whether a company engages in online payroll, contracts with a service provider such as BenefitMall.com, or handles payroll in-house, there are numerous options for paying employees what they have earned. Cash and checks are still utilized in the 21st century, but direct deposit is more popular than it has ever been. BenefitMall encourages employers to consider direct deposit if they do not already have it in place.
Direct deposit is simply an electronic transaction that transfers money from the employer’s bank account into the bank accounts of its many workers. Employees still get paid, but no cash or paper check actually changes hands. It is a rather efficient way to make payroll, regardless of how frequently employees get paid. Below are some very good reasons employers offer direct deposit.
Employees Are Paid Faster
Issuing paper checks is a multi-day process that includes data entry, check printing, check distribution, and employee cashing or depositing of those checks. A process that could begin on Monday may not conclude until the employee actually cashes a check on Thursday. Direct deposit is much faster. Indeed, it’s almost instantaneous.
Direct deposit is accomplished through an electronic transfer between bank accounts. And now, thanks to new rules relating to how long financial institutions have to complete those transactions, employees have access to their funds within one business day. For many institutions, deposits made before midday are available that same day while the remainder are available the next business day.
Direct Deposit Reduces Fees
More and more banks are getting on the direct deposit bandwagon by waiving certain kinds of monthly fees for employees who are paid via direct deposit. Maintenance fees on checking accounts are a good example. The fewer paper transactions banks have to process, the less money they spend internally on their own operations. Many are attempting to incentivize their customers by waiving such fees in exchange for direct deposit payroll. Beware that fee waiving is not universal among banks, though.
The Potential for More Interest
When employees use interest-bearing accounts to receive their payroll, they have the potential to earn more interest by having their money in the bank for a longer period. This interest will not amount to much on a monthly basis – especially given that interest rates on bank accounts remain historically low – but every little bit helps. Paying your employees by way of direct deposit can increase the amount of interest they earn. It’s like giving a small bonus without actually spending more money.
Employees Appreciate Direct Deposit
The most important reason for implementing direct deposit is this: employees appreciate it. We now live in a day and age where the vast majority of younger workers are used to doing life entirely online. For them, electronic transactions are the norm. Receiving a paper check and having to go cash it is not part of the way they normally do things; they would prefer the payroll transaction to be handled electronically.
Of course, there will always be those employees who don’t maintain bank accounts. For them, cash, checks and payroll cards are still necessary. The beauty of direct deposit is that it can be offered to those employees who want it while paper checks and cash are still available to those who need or prefer them.
BenefitMall.com is a Dallas-based payroll and benefits company serving clients around the country. They offer direct deposit payroll processing, along with a full range of payroll, benefits, and human resources solutions. To learn more about how direct deposit can benefit your company and your employees, speak with a BenefitMall payroll expert.