Providing paperless payroll to your employees saves money...and lots of it. Just ask City of Grand Rapids, Michigan Comptroller, Donijo DeJonge who estimates going paperless will save the City approximately $114,000 per year. She estimates the costs of buying check stock and printing and delivering checks costs about $4 per payroll check. And that doesn't include some of the hidden costs to both employers and employees.
Consider the following additional costs when contemplating providing paperless payroll to your employees:
- Payroll check fraud is one of the largest challenges facing businesses and financial institutions today. Advancing computer technology is increasingly easy for criminals to access and enables them to easily duplicate a paper check with a simple printer. Blank check stock is easy to obtain and even fonts, like those found on the bottom of paper checks is easily downloadable.
- Bank service charges on one extra business account can be as high as $1000 per year. Because of check fraud, businesses often operate a separate checking account so only payroll related expenses clear. This limits exposure to just one payroll period when a business transfers the total payroll expense each pay period.
- Reconciliation of payroll checks against the bank statement takes time. With paperless payroll, one debit for all net pay is the only item on the bank statement each payroll.
- Reissuance of lost checks takes time. Employee's often misplace or damage checks, requiring paper checks to be reprinted.
- Postage and delivery of checks is expensive. With first-class postage now at $0.45 per envelope, a business with just 50 employees can add expense of $1,170 per year in postage alone. If a business uses a payroll service provider who ships UPS or other ground shipping, the cost of delivery of the payroll package is approximately $520 annually.
- Decreased productivity can be experienced by business who do not offer paperless payroll when employees are required to leave the business to cash payroll checks.
- Environmental costs for paper checks can be very high. It is estimated that paper checks use over 674 million gallons of fuel and add 3.6 million tons of CO2 to the environment.
Employees also incur significant costs when they are not offered paperless payroll, including:
- Free Checking: Most financial institutions offer free checking to customers who participate in direct deposit. The savings add up quickly when you consider the average monthly fee to maintain an interest bearing checking account is $10.56/month or $126.72 per year.
- Identity theft: Payroll checks left in mailboxes can result in the identity theft because paystubs generally include personal information. The costs associated with identity theft can be be devestating.
What Exactly is Paperless Payroll?
Paperless payroll is any system that combines the following features and allows employees to be paid directly, without issuing paper checks that need to be printed, deposited or cashed:
- Direct Deposit: depositing funds directly to an employee's account via the Automated Clearing House (ACH). Generally, direct deposit requires a minimum of three steps to process, including: 1.) Sending a computer generated file to a bank or ACH processor; 2.) The receiving bank then sends a file to the Federal Reserve; and 3.) The Federal Reserve sends files to the receiving banks who post debits and credits to employer and employee accounts.
- PayCards: A payroll card that allows an employee to access their paycheck by using a debit card at a point of purchase or withdrawing funds at an ATM. There is usually a Mastercard or Visa logo on the card which makes the card very versatile. Funds are deposited to a Paycard in the same manner that direct deposit is processed. PayCards are generally FREE to employers and can be free to employees depending on how they use the card.
- Online Paystubs: A system in which employees can securely sign in to an internet website to view paystubs.
How Can I Begin Paperless Payroll?
Paperless payroll may be a great solution for your business and your employees. But, the first step is to determine if your state allows you to mandate direct deposit or electronic payment of payroll. To find out your state laws, download our State Direct Deposit Law Fact Sheet.
