Good news! There is no more waiting in those ridiculously long lines at the bank only to have an unfriendly teller wait on you. Read on and see the benefits to Employers and Employees by using Direct Deposit instead of Printed Paychecks. And, look for our other article on how using Payroll Pay Cards can even further benefit both sides, for employees do not have checking accounts.
How does Direct Deposit Work?
Direct deposit is a method of electronic funds transfer. You authorize your business payroll service to deposit your employee wages directly into their bank accounts. The payroll processing service instructs your financial institution to electronically deduct your net paycheck amounts from the account you have designated. They will usually also deducted one separate amount for all payroll taxes at the same time. The payroll service directs the financial institution intermediary to credit (deposit) the appropriate net paycheck amounts to each employees designated account. The date of deposit is the Paycheck Date that you designate. There is a lead time of up to five days, to allow the funds to safely clear your account and be verified for direct deposit. Federal Reserve Banks and financial institutions process these electronic transactions using a process called national automated clearinghouse (ACH) using a NACHA file. Some banks, even the largest well known in the country, will process direct deposit in two days. However, it is not uncommon in this case for businesses to bounce the funds because the clearing system does not provide full safety precautions within such a short time period. That is why most reliable payroll services will use a longer lead time. And, as a conservative business owner, you should choose a bank or service that protects your payroll funds by not mixing with other bounced funds. Thus, short lead times usually indicate a willingness by a bank or service to accept low quality payroll business in order to grow their market share.
To sign up your employees for direct deposit, you will fill out a bank authorization form and your employees will fill out a corresponding direct deposit form. These are kept on file by the payroll service as evidence of their authorization. Fees for bouncing payroll funds are usually significant. That is because of the risk involved of releasing funds to employees that are not fully funded by the business. It is very important to keep sufficient payroll funds in your main bank account, or, open a separate bank account where you transfer the funds in one lump sum each payroll.
It is very easy for a good payroll service to change banks either for the employer or employee. It involves communication along with new forms signed.
Why Would I use Direct Deposit instead of Printed Paychecks for my Small Business Payroll:
Direct Deposit offers employers a money-management tool that benefits Employers and Employees. More than half of the country is already using direct deposit for payroll paychecks.
Benefits to Employees:
Direct deposit is good for . . .
Employees who would like to save time by eliminating trips to the bank to cash a payroll check.
Employees who want to receive their paychecks as early as possible on the payday.
Employees who want access to their pay when they are not in the office on payday.
Employees who want more security against loss, or theft of their check.
How many of you have accidentally lost your paycheck, or didnt receive your check in the mail, or threw it in the trash with a stack of papers, chances are this applies to a lot of you. These are just a few reasons why Direct Deposit is the right choice for your company and employees. An added befit is employee wages are available for them to access on the day of the payday usually early morning, with no rushed trip to the bank after they get off work only to arrive too late for the money to be put in their account the same day. The employee doesnt have to be in your office to pick up their check or make special arrangements when they are on vacation or traveling on business in order to get their paychecks. Employee wages can be deposited into both checking and savings accounts on one payroll, giving the employee the ease of having money go into 2 different accounts without a transfer fee or any extra work. Also, most banks offer free checking to people who have direct deposit.
Benefits to Employers:
The benefits of direct deposit to employers is . . .
You dont have to be in the office to sign the checks
You dont have to verify the checks are mailed on time
You dont have to separate checks as they print out
You dont have to stuff envelopes
And all the benefits to your employees make for a satisfied workforce
One of the major benefits to companies from having their employees on direct deposit is employees not taking longer breaks or lunches to go to the bank. This means more productivity. Another added benefit to companies who use direct deposit with a payroll company is that when it comes time to reconcile your checking accounts you wont see, for example, 7 different amounts from 7 different times checks cleared the account. You will see one amount taken out on the specified day. Direct deposit is also much safer than printed check. It reduces chance of someone altering your checks, forging your signature, or even changing the amount of the paycheck. With direct deposit there is less room for human error, because there are fewer steps to take in the payroll process. Direct Deposit is also very tree and ozone friendly, it cuts back on the use of gas going to the bank and on paper used to print the checks.
There are several industries that are particularly suited to direct deposit:
Restaurants and Retail Stores: passing out payroll to a large number of employees who do not share the same work schedule is time consuming.
Attorney or Law Firms: highly reimbursed attorney and clerical staff can incur costly reductions in billable hours or missed work time by taking time off work to go to the bank.
Companies where employees carpool, and do not have an auto to go to the bank at lunch to cash their check.
Travelling Owners: when an owner travels, it is often easier to process direct deposit than have questions or issues on paychecks passed out in their absence.
Remote Staff or Salespeople: rather than waiting for a check in the mail, they can have their check on payday. Also reduces mailing costs to employer.
How Much Money Can I Save Using Direct Deposit Instead of Printed Paychecks:
By using direct deposit, you will save on the cost of paper, the cost of ink for the printer, and the cost of time spent printing out each check. There can also be time spent signing, stuffing into envelopes, and distributing to employees. Companies can save up to as much as $1.00 for every payroll check that is deposited right into their employees accounts and between $10 and $50 per payroll for supplies and administrative time. Direct Deposit saves your company gas from having to go pick up more paper check forms, ink, envelopes, and stamps. Reducing administrative time and tasks can greatly reduce the overhead costs to run your business.
A business
accounting and bookkeeping firm can help you with the monthly bookkeeping now that it is simplified. They can make the proper monthly entries for wages and taxes.
So, now that you know the benefits of Direct Deposit, what are you waiting for?
Why should you use Pink Payroll to handle your Direct Deposit Needs?
We are hands on and tailor our entire payroll process to your every need. At Pink Payroll, we carefully review each payroll for accuracy. We are always available by phone or email and respond very quickly to get you the answers you need. Our rates are great and you just cant beat our commitment to getting the job done quickly and with no errors.
Now that you know what we are about please dont wait contact us today by filling out a
Pink Payroll Quote Form to get more answers to your questions or to get your Quick Quote on Direct Deposit.
