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Use paperless options for your small business payroll program.

Paperless Payroll Program: Pros and Cons

Payroll printing costs got you down?

You may want to explore paperless payroll program options. This way, you can manage payroll from your computer. You might decide to make just a few payroll tasks paperless. Or, you could complete almost all your payroll electronically.

Paperless payroll options

You have many options when it comes to paperless payroll. Here are a few options to get you started.

Electronic payroll records

Are your file cabinets stuffed with payroll paperwork? You may want to keep electronic records to avoid clutter.

The Fair Labor Standards Act (FLSA) requires you to keep payroll records for at least three years. State governments may have their own rules for recordkeeping. Check with your state to see how long you should keep documents.

Just like hard copy records, paperless payroll records must be accurate. While you do not have to print all your online records, the FLSA requires the records to be printable.

Employee self-service (ESS) models

An ESS model allows you to share important information about your business with employees online. Information might include employee handbooks, benefit options, and your business’s history. Because employees access the documents online, you can easily communicate information.

An ESS may also include a time and attendance add-on. Employees clock in and out of work online. Time and attendance computes employee wages for you. You do not have to calculate hours worked, tax deductions, or net wages. You can store employee work history and forms in an ESS model.

Electronic funds transfer (EFT)

EFT allows you to transfer wages without exchanging a check. To use EFT, ask your employees for their bank account and routing numbers.

Your bank transfers the employee’s wages from your account to the employee’s account. The employee usually receives wages less than a day after the scheduled payment date.

One kind of EFT is direct deposit. Each state has its own rules for direct deposit. Find your state’s requirements in our direct deposit infographic.

You can also pay an employee electronically with a pay card. You transfer funds to the pay card, which can be used like a debit card.

Choosing a paperless payroll program

Before you take your payroll program digital, here are some pros and cons of paperless payroll:

Pros

  • Keeping electronic payroll records may be faster than keeping hard copy files. Your records are compiled into one place. You do not have to worry about paper records getting lost or damaged.
  • Paperless payroll records are often password protected, keeping your information confidential. Payroll records stored in the cloud are often secured by the software company.
  • Electronic payments reduce the labor involved in printing and distributing paychecks, and the cost of checks, envelopes, and postage.
  • With electronic payment options, employees do not have to go to the bank to cash their paychecks. Employees can designate different accounts for their paycheck deposits.
  • ESS models allow your employees to easily access information about their payroll history. Employees can change information, download forms, and view their payroll history online.
  • By using payroll software, you reduce the need for an accountant. You can track your transactions, and the software computes your account totals for you. Cloud-based payroll software allows you to run payroll from anywhere with an internet connection.

Cons

  • Like any change to a business, the actual switch to paperless payroll systems will cost you time and money. Make sure you are prepared for initial costs. Also, be prepared for a learning curve as you transition to electronic payroll options.
  • You will need a computer to manage your paperless payroll records. If you do not already have a computer, you will need to get one to do your payroll electronically. For online software, you also need an Internet connection.
  • If you have desktop payroll software on your computer, you are responsible for securing your information. You need to make sure your computer is secure. When payroll laws and tax rates change, you are responsible for updating the software. This does not apply to cloud-based software.
  • Your employees need to use a computer with an Internet connection to access an ESS model. You may have employees that do not have a computer or an Internet connection. This may make it difficult for employees to manage their payroll information.
  • Employees also need a bank account to receive direct deposit. Some states do not permit you to offer direct deposit as your only form of payment. This is because some employees do not have bank accounts. You could pay an unbanked employee with a pay card, but some states also have specific rules on pay cards. Depending on your state and employees, you may still have to send paper paychecks to some employees.

Your paperless payroll options

Implementing electronic methods to your payroll program can add lasting benefits to your small business. Evaluate your options for paperless payroll. Then, choose paperless options that will help you run payroll faster and more cost-effectively.

Are you interested in using paperless, cloud-based options for your payroll program? Our payroll software offers an employee portal and free direct deposit. Try it today!

This article was updated from its original published date (6/2/2011).

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