Advantages To Direct Deposit Of Employee Wages

February 11, 2016

Nowadays, the majority of employees in the United States are paid via direct deposits into their bank account, and these numbers are growing due to the increased benefits for both employers and their workforce. 

What is a direct deposit of wages?

Direct deposits are made when an employer creates an account with a local bank, and arranges for their employee’s wages to be paid into it via the internet, using their own - or the banks – software. As payments are made digitally, employers using this system need no longer write (or print) out checks for their staff. Instead, checks are transferred directly to each employee’s bank account from the employers account. 

What are the advantages for the employer, when directly depositing wages?

  • Electronically processed payments are cost effective
  • The risk of lost, stolen or fraudulent checks is greatly reduced
  • Employees are guaranteed timely payments, even when out of office, leading to less potential discontent among the workforce
  • Transaction reports are instantly available online
  • More control over payroll as a whole and a reduction in the time spent bookkeeping

What are the advantages for employees of direct deposit wages?

  • Checks are deposited on a regular and reliable basis
  • Payments take less time to clear
  • The risk of losing a check or having it stolen, are greatly reduced
  • Time is saved as checks no longer need to be cashed at a bank or ATM
  • Lots of banks offer a free checking service to customers who are paid their wages via direct deposits.

However, there are some costs to employers – and these will vary greatly depending on the state – including set up fees and sometimes a monthly fee for direct deposit, although this is reasonably uncommon. That said, research shows that employers prefer to use this method of paying their staff as the benefits and overall savings, far outweigh the cost. Not only are employers saving money by reducing the amount of time spent preparing payrolls and writing out checks, but check fraud can cost a business dearly and the risk of this is significantly lowered with the use of direct deposit. The following final advantage may seem to be a minor one, but it’s worth also considering that time is lost when employees leave work to deposit their pay checks and every good employer knows that time equals money; the less time lost in this manner, the more productive your business can become.

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