• No paper check to lose or damage.
• No making a trip to the bank or ATM.
• The money is scheduled to be in the employee’s bank account on pay day (usually in the morning).
• If a holiday falls on a pay day, many employers will pay a day early, and the deposit is in the bank account a day early.
• Many employers offer the ability to split the pay among more than one bank account, if the employee chooses.
• For the employer, there are no outstanding checks to reconcile.

Some employers give employees the option to choose between receiving a paper check and direct deposit.  Other employers make direct deposit the only option.  Each state has different laws addressing whether an employer can legally mandate direct deposit.  Your state’s Department of Labor is a good starting point to check.  If your state does not allow you to “force” employees to be paid via direct deposit, you can still take advantage of the convenience and cost savings for those employees who do use direct deposit.

Overcoming Employee Objections
Some employees don’t want to have their pay direct deposited.  They like having a tangible check in their hands to take to the bank themselves.  They’re not crazy about the idea of their employer having their bank account information, and want to be responsible for seeing that their money is where it should be.  Some suggestions for encouraging direct deposit would be to stress the convenience of having their money ready and waiting for them on payday.  Most banks now offer online banking, so if the employee still needs to move money around within different accounts, they can most likely do this without making a trip to the bank.  Get other employees with direct deposit to vouch for how easy and stress-free the process is.  And if for whatever reason a direct deposit is incorrect or did not happen, a manual check can still be cut and given to them on payday until the issue is resolved.

Paystubs – Paper vs. Electronic
When you pay with direct deposit, the employee still needs to receive the details of their paycheck, such as pay period, pay date, gross and net pay amounts, taxes withheld, and any deductions.  This pay “stub” can be given to them in paper form or electronic, such as a password protected attachment in an email or an internet website that they can access with a secure login. A paper check and/or paystub must be printed, folded, stuffed in an envelope, sealed, sorted, and either mailed or distributed another way.  Giving electronic paystubs to your employees with direct deposit will save substantial money on paper, labor, shipping, and/or service costs . . . not to mention saving a tree or two.  Keep in mind some states require that if employees do not have electronic access, you must give them the option to receive a paper stub.  Some states also have provisions for what information needs to be included on the stub.

What’s The Next Step?
If you don’t offer direct deposit and would like to start, check with the bank that you use for your payroll account.  If you outsource your payroll process, check with your payroll provider.  There are a few different methods of sending the payment instructions to your bank.  A lot of banks now have online banking software that will allow you to enter payment instructions directly including the employee’s name, banking info, the amount to be paid, and the date on which to transfer funds.  There is also an electronic file called a NACHA file, which contains all of the payment information for each employee, that can be uploaded to your bank.  There are also third-party direct deposit vendors who will assist you with creating and sending the payment instructions to your bank.