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4 Benefits of Switching to Paperless Payroll

4 Benefits of Switching to Paperless Payroll

In this article, we'll discuss the 4 benefits of switching to paperless payroll to save you time, money, and eliminate potential errors.

Are you manually handling payroll documents? Perhaps you’re still mailing employees paychecks. Regardless of your current process, if you’re reading this, you’ve probably thought about switching to paperless payroll.

According to Owl Labs, 65% of employees say they’re working remotely in some capacity. However, if remote employees are using paper processes, this hinders your organization from running smoothly. Shifting from a paper-based process to a paperless one can save you time and money and eliminate potential errors. So, let’s discuss what paperless payroll is and the benefits of switching to an online process.

What is Paperless Payroll?

Paperless payroll is the process of paying your employees online without the use of paper. Businesses can achieve online pay with the help of paperless payroll systems. Typically, the payroll software features needed for a paperless process include:

  • Employee time tracking
  • Secure, cloud-based storage of employees’ personal information
  • Electronic payment options
  • Employee access to online paystubs and W-2s

With more people working remotely, paperless payroll is an efficient way to ensure employees are paid on time and accurately no matter where they work.

What are the Different Types of Paperless Payroll?

Before you begin the process of switching to paperless payroll, you must understand the different categories that make up paperless payroll.

Payroll Records

Payroll records consist of all documents associated with paying employees. These include direct deposit authorization forms, pay stubs, tax rates, benefits, tax deductions, etc.

When a company isn’t using payroll and HR software, they often create Excel spreadsheets and server folders for document storage. Unfortunately, these manual processes often lead to redundant data and leave payroll managers feeling overwhelmed.

Unified payroll and HR solutions help to eliminate these burdens. All payroll-related data is stored in the cloud-based software securely, streamlining payroll records once and for all.

Manual Processes

The Fair Labor Standards Act requires employers to hold payroll records for at least three years.

Electronic Funds Transfer (EFT)

An electronic funds transfer is the process of sending money directly to another bank account. EFTs, enable you to transfer employee wages to their bank without mailing them a paper check. Instead, you’ll just need your worker’s bank account and routing numbers. There are several forms of electronic funds transfers that you can use to send money to employees. Here are a few:
  • Direct Deposit: This type of EFT lets you pay employees without worrying about paycheck hassles. Just tell your bank or service provider the amount to deposit in an employee’s account. On payday, the money will withdraw from your primary payment method into the employee’s account.
  • Credit/Debit Cards: Surprisingly enough, EFT payments can be made through a credit or debit card as well. Use your card to move money from a business bank account into another account, make purchases, or pay bills.
  • Wire Transfers: These types of EFTs are used to send large sums of money from one account to another. Is an employee receiving a bonus? Are you purchasing a large piece of office equipment? If so, a wire transfer might be best for you.
  • Pay-by-Phone Systems: This type of electronic transfer allows you to send money between accounts or pay bills over the phone.
  • Electronic Checks: While these are similar to paper checks, they are different because they are online. You just need an employee’s routing number and account number to make a payment.
Note: Direct deposit and EFT laws vary from state to state. See the table below for more information.
StateMandatory?Covered EmployersState-Level Law
AlabamaPrivate Sector: Yes
Public Sector: No
AllNo further requirements to the federal law
AlaskaNoAllRequires employee’s agreement
ArizonaYesAllRequires the employee to specify the bank receiving direct deposits, consistent with federal law, or to agree to receive payments in electronic pay card form.
ArkansasNoPrivate employers and state governmentAllows employees to opt out of direct deposit with a written statement.
CaliforniaNoAllRequires employee’s agreement
ColoradoNoPrivate employersRequires employee’s agreement
ConnecticutNoAllRequires employee’s agreement
DelawareNoPrivate employersRequires employee’s agreement
District of ColumbiaNoPrivate employers and local
FloridaNoAllRequires employee’s agreement
GeorgiaNoAll except for those in farming, sawmill, and turpentine industriesNo further requirements to the federal law
HawaiiNoAllNo further requirements to the federal law
IdahoNoAllRequires employee’s agreement
IllinoisNoAll private employers and local governments (not state and federal)Requires employee’s agreement
IndianaYesAllState restrictions in addition to the federal law
IowaYes: Employers may not require employees to participate in direct deposit if they were hired before July 1, 2005.

Employers may require a new employee to sign up for a direct deposit as a condition of hire unless the cost to the employee of establishing and maintaining an account would reduce the employee’s wages to a level below the minimum wage.
AllRequires employee’s agreement
KansasNoAllState restrictions in addition to the federal law
LouisianaYesPublic sector and state governmentNo further requirements to the federal law
MarylandNoAll employers under various statutesRequires employee’s agreement
MassachusettsYesAllNo further requirements to the federal law
MinnesotaPrivate sector: No
Public sector: The Commissioner of Labor & Industry may require direct deposit for all state employees
All employers under various statutesState restrictions in addition to the federal law
MississippiNo regulations regarding direct deposit AllNo further requirements to the federal law
MissouriNo regulations regarding direct deposit AllState restrictions in addition to the federal law
MontanaNoAllRequires employee’s agreement
NebraskaNo regulations regarding direct deposit AllNo further requirements to the federal law
New HampshireNoAllRequires employee’s agreement
New JerseyNoAllRequires employee’s agreement
New MexicoNoAll employers except employers of domestic labor in private homes and employers of livestock and agricultural labor
New YorkNoAllRequires employee’s agreement
North CarolinaYesAllRequires employee’s agreement
North DakotaYesAllRequires employee’s agreement
OhioNo regulations regarding direct depositAllNo further requirements to the federal law
OklahomaPrivate sector: Yes
State government: Yes
All employers under different circumstances Requires employee’s agreement
PennsylvaniaNo regulations regarding mandatory direct depositAllRequires employee’s agreement
Rhode IslandNoAllRequires employee’s agreement
South CarolinaNoAllState restrictions in addition to the federal law
South DakotaYesAll
TennesseeYesPrivate employers with at least 5 employees
TexasYesAllState restrictions in addition to the federal law
UtahYesPrivate employers except those involved in farm, dairy, agricultural, viticulturally, or horticultural pursuits; stock or poultry raising; household domestic service; or other employment in which a written agreement provides different terms.Allows employees to require direct deposit if they pay at least $250,000 in payroll taxes to the state or if at least two-thirds of the company employees agree to accept direct deposit.
VermontNoAllRequires employee’s agreement
VirginiaNoAllState restrictions in addition to the federal law
WashingtonYesAllState restrictions in addition to the federal law
West VirginiaState institutions of higher education: Yes
Employers subject to the WPCA: No
State restrictions in addition to the federal law
WyomingNoAllRequires employee’s agreement

Online Pay Stubs and Timesheets

Online pay stubs and timesheets are other components of paperless payroll. Businesses can take advantage of a few different options for creating digital pay stubs and timesheets. The first option is for a company to develop its own forms and manually enter data. The alternative option is for you to partner with a payroll and HR provider that utilizes employee self-service software.

Employee self service software is a payroll resource hub for workers and employers. It can record employee clock-in data and apply it to digital timesheets. This automation streamlines the timekeeping process and ensures accurate payroll.

Managers can edit and adjust times as needed, and employees can view hours worked in real-time. Once a company processes timesheets and payroll, employees can view their pay stubs electronically using the self service solution. Providing employees with direct access to online pay stubs reduces costs associated with printing paper versions.

The Benefits of Switching to Paperless Payroll

Before the advent of online payroll solutions, businesses completed their payrolls manually using paper and spreadsheets. Even today, HR departments spend hours manually processing payroll and cutting paper checks. Unfortunately, this approach leaves employers vulnerable to payroll errors. As a result, HR managers spend even more time correcting paychecks and dealing with upset employees.

Thanks to payroll technology, businesses can automate these cumbersome processes and focus on more strategic tasks. So while switching to paperless pay may seem overwhelming, it doesn’t need to be. Once you realize the benefits of paperless payroll, you’ll wonder why you didn’t do it sooner. Now, let’s look at those benefits in more detail.

1. Employees Have 24/7 Access to Payroll Information

According to a recent Forbes Digital Banking Survey, 78% of adults in the U.S. prefer to bank via a mobile app. This percentage shows how important payroll smartphone technology is for a workforce. The good news is, many paperless payroll solutions offer mobile apps so employees can access their payroll information anytime.

A mobile self-service app lets employees receive alerts and immediately view their pay stubs. As a result of these apps, employees end up with 24/7 access to their pay information. This instant access reduces HR questions and frees up payroll and HR administrators’ time for strategic tasks.

2. Your Organization Saves Money

The cost for businesses to issue paper checks is anywhere from $2.01 to $4.00 per transaction. There are also additional costs associated with employee labor, materials, bank fees, and postage. The time and money saved from cutting paper check costs are substantial. By going paperless, you can save yourself and your business these unnecessary expenses and reduce time spent on tasks like:

  • Collecting timesheets
  • Writing and signing paychecks
  • Printing and distributing paychecks
  • Processing W-2s and 1099s

The cost savings of paperless pay allows your business to allocate funds towards other strategic initiatives, like hiring, employee retention, and career development.

3. You Can Streamline Your Payroll Taxes

The benefits of going paperless also extend to your payroll taxes. Most payroll providers have tax compliance experts on staff. These experts will pay and file your federal, state, and local taxes electronically on your behalf.

Streamlined compliance protects your company from paying potential fines for incorrect payroll tax filings. You also save valuable time when you don’t have to stress about submitting your payroll taxes.

You’ll also have access to your quarterly payroll tax packets and assistance with year-end processing. These benefits alone can save a significant amount of time and money for your company.

4. Eliminate Clutter from Your Workday

Eliminating paper-based payroll saves your team the hassle of organizing and locating physical reports for an audit. Instead, get rid of file cabinets and use an online payroll processing platform. Online payroll platforms store historical payroll records online, so you’ll always have a complete audit log available.

Some systems have analytical dashboards so you can review payroll data. These dashboards and data keep your payroll and HR processes as efficient as possible.

It’s also essential to check and see if the system you’re considering utilizes data integrations. Integrations for other systems like General Ledger packages create a payroll process that’s more efficient and unified.

5. Pay Employees On-Time and Accurately

Employees who get paid via direct deposit receive their wages faster than those who still receive paper checks. In a paper world, employees wait for a check to arrive in the mail. Then they wait for the bank to clear the deposit. In a paperless environment, employers eliminate payday delays by transferring dollars electronically.

Paperless pay also eliminates inaccuracies associated with manual payroll data entries. Employees are already living paycheck to paycheck. Accurately paying employees gives them peace of mind and helps your organization avoid compliance fees associated with payroll errors.

Should I Offer Paycards to My Employees?

A recent Visa study showed 82% of employees consider working for a company that offers a paycard as a significant benefit. Paycards are another option to provide employees with when switching to 100% paperless payroll. Like debit cards, they are secure payment solutions for workers who do not have a traditional banking account. Instead, employees can access their pay from an ATM or use their paycard as a debit card when making purchases.

Check to see if the vendors you are considering offer paycard options as part of their automated payroll services.

How Do I Switch to Paperless Payroll?

Once you’ve decided to switch to paperless pay, it’s essential to communicate with employees to encourage adoption. Your staff may be apprehensive about making a change, especially if they’ve had past negative experiences. However, your employees will become your biggest champions once they understand how beneficial paperless payroll is.

Your company can achieve a smooth transition to paperless payroll in four easy steps:

  1. Choose an online payroll solution that meets your company’s needs. Look for features and services like online time tracking, payroll tax filing, and employee self service.
  2. Communicate with your employees beforehand and explain the benefits of changing so they have time to prepare.
  3. Train your employees on the self-service solution. Demonstrate how they have easy access to their pay history, direct deposit vouchers, and more through a secure application.
  4. Pay your employees using a combination of methods like direct deposit, paycards, and earned wage access.

Celebrate the Switch to Paperless Payroll

Switching to paperless payroll is beneficial for HR managers, employees, and company decision-makers alike. Avoid manual, time-consuming self service and money-wasting processes. You can leverage payroll and HR technology to automate business workflows, gain a competitive edge, and reduce your carbon footprint.

When you switch to paperless payroll, you commit your organization to a more efficient process, setting your organization up for success. Instead of performing manual tasks, HR managers can focus on initiatives that will grow your business.

How APS Can Help

APS’ all-in-one payroll and HR solution offer paperless payroll processing and tax compliance services. Our intuitive payroll process allows you to apply deductions automatically, fix potential errors, and view payroll reports before processing payroll.

Payroll processing can be decreased from 2 days to 2 hours, saving you valuable time and money. In addition, our technology supports 100% paperless payroll so that you can offer your employees direct deposit and paycard options.

To learn more, call us at 855.945.7921.

Sales 855.945.7921  |  Support 888.277.8514  |