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Offering Electronic Payment Methods to Employees

Offering Electronic Payment Methods To Employees

Learn the different types of electronic payment methods available for employees as well as the benefits of offering paperless options.

One of the most crucial processes of running a business is paying employees accurately and on time. Many employees opt to use direct deposit to receive their paychecks because of its convenience and reliability. However, there are other digital payment methods employers can use to pay their staff. With 21.6% of employers offering only electronic pay to their employees, paperless wage payment is increasingly more common.

There are many advantages to employers offering electronic payment methods, especially for underbanked or unbanked employees. In this article, we’ll discuss the different types of electronic payment methods available for employees. We’ll also provide some benefits of offering these payment types to help you decide which options are best for your employees.

What are Electronic Payment Methods?

Electronic payment methods are contactless, paperless, and cash-free ways to pay a person or a business. Electronic payment options are quick, safe, and convenient. More individuals and companies are moving away from traditional payment methods like cash and paper checks.

Payroll Doesn't Have to Be Hard

Types of Electronic Payment Methods

Many employers that decide to offer electronic payment methods opt for direct deposit and paycards. However, there are other options to consider for your employees. We’ll talk about the two most common types first and then provide some additional paperless payment methods to consider.

Direct Deposit

Direct deposit is the process of transferring funds into a bank account electronically. Direct deposit is by far the most popular method of electronic wage payment, with over 99% percent of employers offering this option.

Employees who are paid via direct deposit receive their wages faster than those who still receive paper checks. Employers can use electronic funds transfer (EFT) or Automated Clearing House (ACH) transfer for direct deposit.

What’s the Difference Between EFT and ACH?

EFT and ACH payments are both types of electronic payments. However, ACH is a type of EFT payment. There are pros and cons to both types of payments, so it’s vital to do your research and determine what is right for your business.

Paycards

A paycard, also known as a payroll card, is a type of reloadable prepaid card that is not linked to a bank account. Employers can use paycards to load workers’ wages every payday.

Paycards have become a popular method of pay with underbanked and unbanked employees. A paycard can be used as a debit card to buy groceries, receive cash back from purchases, and make ATM withdrawals. Some cards also allow employees to pay bills with them.

Curious About Paycards?

Download our Essential Guide to Paycards so you can decide if this is the right payment option for your employees.

Earned Wage Access

Earned wage access (EWA) is a relatively new payment option. EWA provides employees with access to a portion of their accrued wages before the end of the pay cycle. Same-day access to earned wages reduces the need to live paycheck to paycheck and rely on predatory payday loans.

Earned wage access is not a loan, and the accessed funds are deducted from an employee’s pay at the end of the pay cycle. EWA gives employees the ability to cover unforeseen expenses without worrying about overdraft fees or payday loan interest.

Digital Wallet

A digital wallet, or e-wallet, is an online system that stores an individual’s payment information and passwords for various websites and payment methods. Users can store funds, make transactions, and view payment histories from their computers or mobile phones.

With younger generations entering the workforce, electronic pay is preferred and expected. In fact, about 150 million Americans have used a digital wallet at least once. Offering paperless payment via digital wallet is also an excellent option for both banked and unbanked employees.

What Are Some Benefits of Offering Electronic Payment Methods?

There are many benefits of offering electronic payment methods to employees for receiving wages. Employers can decrease time spent on payroll, reduce operational costs, pay out benefits, and prevent employee pay delays.

Decrease Time Spent on Payroll

Decrease Time Spent on Payroll

Issuing printed checks to employees is a time-consuming process. You have to process payroll, print paychecks, pressure-seal them, and distribute them. Electronic payment methods are automated and paperless. This automation saves time on paperwork and reduces bank transaction times, enabling HR to process payroll more efficiently.

Reduce Costs of Check Processes

Reduce Costs of Check Processes

Standard checks not only take time to prepare and distribute but contribute to added costs for businesses. According to the Association for Finance Professionals survey, it costs an average of $3.00 to process each paper check.

This expense can add up quickly each pay period. Paperless payment methods eliminate check printing expenses, including fees for postage and reissuing lost, damaged, or stolen checks.

Pay Out Employee Benefits

Pay Out Employee Benefits

Employers can distribute anything that requires cash compensation electronically, such as bonuses, mileage, and meal allowances. Another example of this process is employee tipping in the restaurant industry. Many restaurants have moved away from traditional cash tip disbursement because of the pandemic and are now using electronic tipping.

Prevent Employee Pay Delays

Prevent Employee Pay Delays

Employers can eliminate payday delays by distributing wages electronically. In the past, natural disasters or other events prevented workers from accessing paper checks, causing significant delays.

Paperless payment methods provide a reliable way of getting paid no matter what the circumstances. Electronic payment methods are also beneficial for paying contracted, remote or telecommuting workers on time.

Other advantages of offering paperless payment methods include:

  • Removing bank service charges, payroll fraud, and headcount costs for payroll administration
  • Improving productivity, as employees won’t have to spend time at the bank during business hours
  • Implementing paperless payroll at little to no overhead, as many payroll software providers offer to set up this process at zero cost

Are Electronic Payment Methods Safe?

Electronic payment methods have different security measures depending on which option an employee uses:

  • Direct Deposit: Since money is directly transferred into a bank account electronically, there is no risk of wages being lost or stolen.
  • Paycards: Payroll cards are FDIC insured and provide many of the same security features as debit cards.
  • Earned Wage Access: All personal data is encrypted during any transaction into a bank account.
  • Digital Wallet: Many digital wallets utilize security protocols like two-factor authentication and one-time-use PINs to prevent information from being stolen.

Ensure Compliance With Paperless Payment Methods

It’s essential to remember that even though you are using electronic payment methods, recordkeeping is still involved in maintaining compliance. Let’s take a look at some steps to remember to avoid penalties and fines.

Provide Pay Stubs

Depending on where your business is located, you may be required to provide employees with a pay stub. This requirement applies no matter what payment method employees use.

Pay stubs provide a detailed account of wages paid to employees, including:

  • Gross wages
  • Taxes and deductions
  • Net wages

Maintain Payroll Recordkeeping

Employers must keep accurate payroll records for at least three years, regardless of payment methods offered to employees. Information should include, but is not limited to:

  • Employee’s full name and social security number
  • Regular hourly pay rate
  • Total wages paid each pay period

Know Your State Laws

If you decide to implement paperless payroll for your employees, make sure you offer more than one method of wage payment. For example, if you choose to provide direct deposit and paycards, federal law prohibits employers from mandating employees to receive wages via a paycard only.

Furthermore, any paid employee wages are subject to the Fair Labor Standards Act (FLSA). It’s also essential to check your state’s legislation to ensure your company is compliant.

Do You Know Your State’s Wage Payment Law?

Find out if your state allows employers to mandate electronic receipt of wages.

How APS Can Help 

APS’ paperless employee payroll software helps businesses achieve a paperless payroll process. You can eliminate manual payroll processes, automate your employee time tracking, and provide paperless forms of payment methods. Our paperless payroll software can also increase your efficiency in the following ways:

  • Our document management tool stores essential payroll reports in the cloud, so they are always readily available.
  • Employees have 24/7 access to their pay stub history with our employee self-service app.
  • Analyze and audit differences between payrolls quickly with our online payroll comparisons.

Taking these steps towards a paperless payroll process will reduce operational costs and improve employee satisfaction. 

Gain a Competitive Advantage with Electronic Payment Methods

Electronic payment methods are an increasingly popular alternative to paper checks because they are flexible, secure, and convenient. Employers can gain a competitive advantage in the marketplace by offering paperless wage payment options to their employees. You can attract and retain higher quality workers with on-time and guaranteed pay.

Electronic payment methods like paycards and digital wallets are beneficial for employees with and without access to a bank account. Having digital and instant access to wages is crucial, especially when emergencies arise. Furthermore, many digital payment apps offer money management tools that allow employees to control their finances better. When your employees are more financially stable and secure, they are much easier to retain.

By offering a variety of electronic payment methods, you’ll be able to help your business transition to an entirely paperless system. A paperless process provides a cost-saving solution to check printing and shipping. It also reduces the time spent processing payroll. For employers, the benefits of offering paperless payment options outweigh the disadvantages. With APS, we can help make your paperless payroll implementation process easy and hassle-free.

For more information, schedule a demo with us to see how paperless payment methods can make HR and payroll easier for your team.

 

See What You Can Accomplish With APS

Hear why APS Payroll's award-winning technology and services have earned us a 98% customer retention rate.

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.elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block} Switching payroll providers mid-year can seem overwhelming whether you’ve gone through the process before or not. You may be concerned about making the right software decision or potential disruption to your current payroll processing. However, if your year-end processing was challenging, it might be time to consider a change.To help you make an informed decision, we’ve compiled some tips for a successful mid-year payroll conversion. Our goal is to help you choose the right system for your needs while mitigating the difficulties that can be associated with a payroll provider transition. What is a Payroll Conversion?A payroll conversion is the process of migrating from one payroll software system to another or outsourcing payroll workflows to a new payroll provider. Mid-year conversions typically start between April and July. The amount of time it takes to switch to a new payroll solution depends on:  The complexity of your payroll and taxes If you’re using any integrations with existing systems or having any developed If you’re planning to implement other solutions like HR or time and attendance Starting the conversion process mid-year ensures a smooth transition so you can process your first new payroll well before the year-end season.   Ready to Make Your Payroll Easier? Switching to a new payroll provider in the middle of the year is a great time to start! Learn how we can help make your payroll easier with a free personalized demo. Schedule a Demo When is the Best Time to Switch Payroll Providers?Many companies typically switch payroll providers at the beginning of the year to have a fresh start in a new system. However, you can make a change any time of the year if you’re unsatisfied with your current payroll vendor or process. Converting at specific times of the year provides a seamless payroll data transition. Mapping timeframes helps decrease the risk of lost information when transitioning data from one system to another. Tax specialists rely on historical payroll data when sending filings and payments to the IRS. Selecting timeframes makes record transfers and IRS uploads easier.One major factor contributing to a successful implementation is to ensure you are working with an experienced, knowledgeable payroll and HR provider. It’s essential to partner with a company that understands your unique challenges and is committed to your success. How to Switch Payroll Providers Mid-YearSwitching to a new payroll provider mid-year decreases the risk of missed or lost information during implementation. So let’s talk about more tips for successfully converting to a new payroll provider in the middle of the year. Making a change may be the best thing you accomplish this year. 1. Meet With Your Current Payroll Software CompanyWhile meeting with your current provider might sound like a no-brainer, many businesses don’t have a conversation with their existing software company before switching systems. There are a couple of reasons you’d want to meet with your current payroll software vendor before making a change: To review your existing contract and determine how much notice you need to give before canceling your agreement. To ask about your current software agreement so that you can budget for any additional fees associated with your departure. 2. Research Alternative Solutions Researching other payroll solutions empowers you to make an informed software decision. The more comprehensive you are in your vetting process, the easier it will be to choose the best software for you. Software rating sites like G2 and Capterra and resources like buyer’s guides can help.Software review platforms provide free vendor comparisons and lists of features and benefits of each solution. They also rank software based on authentic user feedback. This insight from verified customers lets you know what your peers think about using that solution, enabling you to make an informed decision. 3. Discuss Your Needs With Prospective Providers Once you have an idea of what solution you might be interested in, it’s time to schedule a demo and discuss your needs. We list some questions you can ask a new provider later in this article.When you meet with a new vendor, have a list of must-haves and nice-to-haves ready. Identify what items you need, and discuss which items are negotiable. Ultimately, this process will give you a better understanding of how a new vendor can help you achieve your payroll needs. 4. Ensure Your Payroll Data is Easily Accessible One final tip for switching payroll software providers is to ensure your payroll data is easily accessible. New vendors will need as much information as possible before getting your new system up and running. This data migration is most easily accomplished with access to your current payroll system.You need to gather your payroll data from your previous provider, limiting the time it takes to transition software systems and mitigating data errors. Ask your new provider for a payroll conversion checklist. Switching Payroll Companies ChecklistThis payroll transition checklist provides you with everything you need when changing payroll providers mid-year. GET YOUR FREE CHECKLIST  Questions to Ask When Switching Payroll CompaniesDuring your research and evaluation process, ask the following questions to determine if a new provider taking over payroll mid-year can accurately and adequately handle your conversion: What are the difficulties of switching payroll companies mid-year? Who will be involved in the conversion process? What is the process for communicating your unique needs to your implementation project manager for proper data setup? Will there be a dedicated project manager who provides a project plan with clear deadlines? Will the provider convert your data and import your payroll and employee history into their system? Will a payroll assessment be conducted to reconcile your data history? Will the new provider run parallel payrolls before the first live payroll submission to confirm data and tax settings are accurate? Does the provider offer integrations with other systems you use, like retirement plans and general ledger packages? Will the provider conduct live training using your company data? Will you have a dedicated customer support team that is easy to reach via phone or email? Will the provider assign you a dedicated success coordinator to help you get the most out of your investment? Does the provider have solutions specialists on staff to help with more complex questions and needs? Does the provider offer a help center with additional resources at your disposal? What Do I Need When Switching Payroll Companies?Knowing what payroll data you will need to give your new provider will ensure a smooth mid-year conversion process. Here are the critical pieces of information you’ll need to provide: Employee list with social security numbers and addresses, as well as direct deposit information for each employee Company bank account information and tax ID numbers (federal, state, and local) State unemployment rates for all states in which you report A list of employee deductions (e.g., health insurance, 401K) Copies of employee W-4s, garnishment orders, and current year Form 941 payroll filings (if available) Year-to-date payroll summary per employee, per quarter For a more straightforward migration process, you can collect a list of employee emails and issues with federal, state, and local agencies. Include copies of correspondence with government entities. Your current provider can assist in gathering the payroll information. Ask for a payroll migration checklist so it’s easier to keep track of data. Make a Change for the BetterSwitching payroll providers can be an overwhelming process, but you don’t have to wait until the beginning of the year to make a change. Mid-year can be an ideal time to convert to a new payroll service.Don’t continue to settle for an ineffective provider. Instead, make the switch now to payroll software that meets your company’s needs so that you can feel confident in your payroll processing. How APS Can Help With A Mid-Year TransitionWe understand the time and commitment it takes to switch payroll providers, so we work hard to ensure your transition is effortless and smooth. Because of our dedication to your success, we’ve earned awards for our Implementation process and above-average User-Adoption ratings.We follow a proven conversion process to ensure a smooth implementation experience: Tax-catch up and payroll history verification Payroll services that include year-end processing, tax filing, integrations, and more Guaranteed tax compliance reducing your compliance risk and financial burden Continued support and service from a dedicated account team committed to your success Advanced multi-level protocols so your data transfer is safe and secure Dedicated success coordinator who will help you achieve usability, adoption, and return on your investment

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