How do your employees prefer to be paid?
Over the course of National Payroll Week 2018, we’ve determined that employees really love being paid — even more than they love Christmas. For many employees, payday means paying off debt. We also know that paying employees the correct amount, on time, is extremely important to both their morale and their loyalty to your company.
But how your employees get paid can be just as important as how much you pay them.
And if you’re still sending your employees home with a paper check each payday, you might want to consider an updated method.
QuickBooks Payroll recently commissioned an independent survey* to find out how employees prefer to be paid. Here’s what they found.
Direct deposit is an employee favorite
Direct deposit is not only the most common way for employees to get paid (72 percent say they are paid through direct deposit), it’s also the most popular. The vast majority of employees (76 percent) prefer to be paid via direct deposit.
It’s not hard to understand why. Direct deposit means that an employee’s paycheck appears automatically in their bank account come payday, and the costs for employers are minimal.
Paper checks are an old-school hassle
Paper checks are a convenient payment method for businesses, and for employees with a smartphone and a personal banking app, depositing a paper check can be as easy as snapping a photo. But only 12 percent of employees still prefer this old-school payment method on payday.
Checks can easily be lost or stolen, and, smartphone or not, depositing checks is still an unwanted hassle.
However, according to the survey, 21 percent of businesses still pay their employees with a paper check — and this form of payment becomes even more common in small companies with 20 employees or fewer.
Cash isn’t king
Only 4 percent of employees say they are still paid in cash, but 9 percent say they would prefer cash as their payment method — and that number grows to 19 percent at companies with fewer than 20 employees.
But paying employees in cash can introduce a host of tax and payroll complications that small businesses would be wise to avoid. If you do decide to pay your employees in cash, accurate and diligent record keeping is a must.
Stop trying to make payroll cards happen
Less than 2 percent of employees would prefer to be paid via a payroll card — and this is true no matter what size the company.
A payroll card acts as an alternative to direct deposit or paper checks. Employees can use their payroll card anywhere debit cards are accepted, and they can even withdraw cash at an ATM (with a fee, of course).
But for 1 in 5 employees, payday means paying off debt — and payroll cards make it difficult to transfer money. Additionally, payroll cards are often accompanied by monthly maintenance fees, ATM fees, and overdraft fees that can quickly cut into an employee’s pay.
They’re a good option for employees who don’t have their own checking account, but it’s the least popular option for those who do. “Employees should always have the choice of direct deposit into their own account,” says Lauren Saunders, managing attorney at the National Consumer Law Center. “It violates the law to require an employee to use a payroll card.”
Choosing the right payment method for your company
In the end, you’ve got to choose the payment method that makes the most sense for your business and your employees. Just don’t forget to review your state laws on the matter to avoid payroll penalties.
*Methodology: In 2018, QuickBooks Payroll commissioned Pollfish to survey 1,000 employees (age 18+) from businesses throughout the US about their payday experiences.