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Each acceptable form of payment has its pros and cons. An employer can decide which is best for his organization. However, their country of operation also plays a role. This is because every country recognizes some forms over others. Also, some factors influence how an employer pays his workers. As a new boss, you might have asked: what are the acceptable forms of payment for payroll?
This could be quite challenging because you are just starting out. Here, we’ll help you figure out the acceptable forms of payment for your workers. Also, you will learn how each type of payroll works. Please continue reading to learn more.
What are the Acceptable Forms of Payment for Payroll?
As an employer, you must understand the payment method that works. Before disbursing salaries or wages, find out the best payment plan for your business. It should favor your workers. Financial aid has become digital because the technology world is advancing. This is why payments have become easier compared to past years. Let us consider the acceptable ways you can pay your employees.
Paycheck
This is one of the most common and oldest means of payment. All you need to do as the employer is to write a check. You can print these checks too. Payroll checks don’t mean your employees must have a bank account. They can receive their salaries via some cashing services for paychecks. This mostly comes with a fee.
As earlier stated, each payment method has its merits and demerits. However, this may pose a challenge. This is because the bearer may misplace the paycheck or someone may steal it. Also, some employees want their financial privacy when receiving money.
Writing your employees’ paychecks may be time-consuming. This holds if you have a large staff. Printing the paychecks can be a better and faster option. The challenge with printing is that the printer may develop a fault. Sometimes, the ink may dry out.
One advantage of paying in checks is that you don’t have to keep bulky cash. Also, it gives room for documentation for future reference. Please note that checks must be available on demand. This means that employee’s paychecks must be available on payday.
Direct Deposit
This is another widely accepted means of payment for your workers. Within the United States, not less than 82% of employees receive payment via this method.
One reason why both employers and employees prefer this method is its convenience. It is stress-free as employers don’t need physical interaction with their workers. With direct deposit, you can pay your employees anywhere and anytime. All you need is your worker’s banking details.
Also, consider the timing for processing your employees’ salaries. Without this, there will be a delay for your workers in receiving their salaries. It may incur some charges. Some include set up, transaction, and monthly charges, as well as payday fees. These charges depend on the financial institutions involved. The regulations stipulated by federal tax laws also play a role. With this method, your employees can receive their salaries using the ATM.
Payroll Debit Card
The payroll debit card is a type of prepaid card which employers use in paying worker’s salaries. These cards could be Visa or MasterCard. With this method, employees can easily use the ATM.
When the payday comes, you pay your worker’s salary into the card. Once done, your employees can withdraw from retail outlets or the bank. With this method, your workers don’t need any banking details to receive their salaries. This debit card system saves time and is less stressful
One disadvantage here is that not all states accept payroll cards. For instance, in Texas, you can pay your employees with this method if they consent to it via writing. Therefore, inquire if your state permits you to pay employees using this method. Another con here is the fees involved. This method benefits the employees more. Sometimes, they may pay some withdrawal charges. Other times, the employer may have to pay these charges.
Cash
This means of payment comes with a lot of caution. Most employers use this method to pay their workers. However, with cash, there is no form of paper trail. Except you decide to generate one which can provide paper documentation of payment. With cash, your employees may have to sign on their payday after receiving their salaries.
It is difficult to keep records of payrolls with this method. If you are not careful, an argument can ensue between you and your employees. With cash, you cannot have solid bank records of payment.
The advantage here is that there is no fee or charge. It may only take time when it comes to auditing your IRS account for payment. This payment form is primarily for temporary labor workers and odd-job workers.
Mobile Wallet
This is fast becoming an acceptable form of payment for payroll. This method came to be from advancements in technology. It is a form of online payment that involves mobile wallets like Apple Pay, Venmo, etc.
All you need to do is make deposits into your worker’s phone electronic accounts. With this method, you can pay anywhere. However, it includes some charges. The employees may pay some during withdrawals. Fortunately, the fees are small or non-existent if you are paying with a bank account.
Laws
As an employer, always find out about laws governing the payment of payrolls. Not all states operate the same way in this regard. Also, you must stick to tax laws when paying in cash. Else the IRS may doubt that you are deducting the right amount of tax.
When paying your employees, there may be a need for a pay stub. This discloses how you pay them and helps clear any form of doubt. It shows the deductions, net pay, taxes, and gross pay.
Conclusion
By now, you should understand the acceptable forms of payment for payroll. As an employer, consider these payment methods properly before choosing one. They don’t work the same way. Therefore, go for what best suits you and your employees. You may decide to hand them cash or pay into their accounts. Also, you can use two methods to pay your workers. With a detailed plan, you should have a stress-free time when paying salaries or wages.
You may also like: Paycheck Perfection: What to Include on a Payment Stub?
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