Every week your payroll system tallies up the number of hours each employee worked. That information goes into a database in anticipation of the next payroll run. This continues week after week, month after month, year after year. It is all fairly routine. But how do you actually pay your employees? Through what means do they receive what they have earned?
If you are like most employers, you are aware of at least two payment methods. There are more. In fact, this post will discuss five different methods. Each one represents an option for your company.
As you read, bear in mind that the law requires businesses to establish a regular payroll cycle and stick with it. Your options are weekly, biweekly, and semi-monthly. A small number of states allow monthly payments, though these typically come with restrictions. You can also change your payroll schedule from time to time if necessary; you just cannot go to random payments.
With all of that out the way, here are the five different ways you can pay employees:
Though hardly anyone uses this method anymore, cash is still a legal way to pay employees. Hours worked, weekly wages, and withholding are all calculated in the exact same way. The only difference is that you pay cash instead of using one of the other methods. There are some small businesses that still use cash for one reason or another. However, there are definite downsides to doing so.
Paying in cash requires keeping that cash on hand. This is an obvious security risk. It also can lead to questions of reporting accuracy in the event you or an employee is audited. Then there is the risk of employees being robbed on payday. It all adds up to a payment system that is not worth using unless absolutely necessary.
2. Paper Check
Paper checks are more common today than cash payments. Still, they are not the most common way people get paid. Paper checks are labor-intensive and costly to produce. They also require employees to take an extra step to get paid. They have to go to the bank or a check-cashing center to turn their checks into actual money.
3. Direct Deposit
Direct deposit is by far the most popular way to pay employees. According to the National Automated Clearing House Association (NACHA) more than 80% of all U.S. employees are paid via direct deposit. This payment method offers convenience and security along with lower costs across the board. It is also fast.
4. Pay Card
Pay cards are one of the newest ways to pay employees. These emerged a few years ago. A pay card is the payroll equivalent of a prepaid debit card. Employees are issued plastic cards that are reloaded with funds at the end of each pay cycle. They can access those funds by using the card to make payments or by withdrawing cash from an ATM.
5. Advance Pay
Last but not least is advance pay made possible through a small number of companies that have made the service available within the last year or so. Here at BenefitMall we partner with ZayZoom to offer advance pay services. With this service, employees can get a certain amount of already earned pay in advance of the next payday transferred to a bank account.
There are many different ways to pay your employees. What method do you use? If you would like to learn more about the ones you do not use, feel free to contact us. We can devise a customized payroll solution for your business.