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Going Paperless: The Prequel


I had written a previous blog “Going Paperless” regarding paperless payroll as it pertains to the check stub, but I suppose I may have put the cart before the horse. You cannot really have a paperless payroll unless you get rid of the paycheck. Of course you have employees with direct deposit, but what about the unbanked, or those who may just prefer to get a check, rather than all of the conveniences of direct deposit? Are there ways to mandate direct deposit to become paperless?

Yes, there are 25 states where the laws or enforcement positions can be interpreted as allowing paperless pay through direct deposit and reloadable payroll cards:

  • Alabama
  • Arizona
  • Colorado
  • Delaware
  • Indiana
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Massachusetts
  • Michigan
  • Mississippi
  • Missouri
  • Nebraska
  • North Dakota
  • North Carolina
  • Ohio
  • Oklahoma
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wisconsin
  • Utah

There are three states that have some restrictive laws: Florida – Choice of paycard or direct deposit can be a condition of hire, however, already employed individuals receiving checks cannot be terminated for refusing to be paid electronically. Iowa – Newly hired employees may be given the option of being paid on a paycard or by direct deposit. Virginia – Newly hired employees may be given the option of being paid on a payroll card or by direct deposit.

States not listed above have restrictions; a good resource for all states is the American Payroll Association, which maintains a list of compliance and regulations on their paycard portal.

A method some employers put in place to “motivate” their employees to move to electronic pay is to mail live paychecks to the employee’s home address on payday. With a Friday check date, some employees may not receive their check until the following midweek. This is typically enough to push the employee to opt in for electronic payment. Keep in mind that this may not be a legal practice in every state, so check with your local laws before implementing this.

When it comes to deciding upon which paycard to promote to your employees, it is best to implement a workplace program, so check with your payroll service provider. They are your best resource. I highly recommend staying away from reloadable cards provided by companies such as GreenDot and American Express Serve, which are ‘off the shelf’ cards that can be obtained in local stores and even online. These cards are very expensive when it comes to fees to the employee, in addition to the fact that these cards are highly associated with payroll fraud.

While being paperless may be great for the environment, there are cost savings to the employer. According to the National Automated Clearinghouse Association (NACHA), the savings can be about $3 per paper check compared to direct deposit. They even provide a calculator on their website to determine how much your company can save by eliminating paper checks.

While I make every attempt to ensure the accuracy and reliability of the information provided in this article, the information is provided “as-is” without warranty of any kind. PayMaster, Inc or Romeo Chicco does not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained. Consult with your CPA, Attorney, and/or HR Professional as federal, state, and local laws change frequently.

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