Edited by: Kimberlee Leonard
and Reviewed:Kimberlee Leonard
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More and more employers are switching from paper checks to paperless pay, but is the switch right for you?
This article explains what paperless pay is, the benefits of paperless payroll, the types of paperless payroll systems, and how to implement them in your business.
What Is Paperless Payroll?
Paperless payroll is a comprehensive electronic payroll system that can trac899k employees’ time, run payroll reports, and digitally distribute payments. With paperless payroll, employees can get their paychecks directly deposited to their bank accounts or pay cards and can access their payroll information (including timesheets, pay stubs, and W-2s) online.
Benefits of Paperless Payroll
Paperless payroll benefits include saving money (and trees) and simplifying your taxes. Let’s look at some of the main reasons employers switch from paper checks to electronic payroll.
Environment Friendly
Not all paper processors are sustainable, and unethical paper manufacturing can cause mass deforestation. While comparing the ecological impact of paper vs. digital is complicated (digital energy expenditure is measured in electricity, while paper’s impact is measured in manufacturing and disposal), using digital processes in place of paper wherever possible is a great way to help save trees.
Saves Money
Paperless payroll is efficient, saving you money otherwise spent on ordering and shipping, or printing and taking the time to manually calculate, sign, and deliver paper checks.
Streamlines Tax Processes
Many paperless payroll software enable you to store pay records all in one place, which can help simplify things come tax time by providing easy access to the documents you need. Additionally, many paperless payroll systems automatically file local, state, and federal taxes for you.
Convenient
Calculating, writing, and delivering paper checks–or even having them printed and shipped–takes up time that could otherwise be used growing your business. With a paperless pay system, you do not have to waste time on manual paycheck production; digital payroll systems are automated and only require minimum input from you or your HR team.
Secure
With paperless payroll systems, you do not have to worry about keeping employees’ personal and financial information under lock and key. Built-in technological security measures enable you to safely transmit and store employees’ info.
Features of Paperless Payroll Systems
All paperless payroll systems are different, but the best payroll software include payroll records, employee self-service, and electronic funds transfer (EFT) features.
Electronic Payroll Records
Many payroll systems provide a document storing feature where you can save and back up payroll records.
The Fair Labor Standards Act (FSLA) requires employers to keep records for at least three years and to keep records used to compute pay for at least two years. Pay-related records that you must keep for at least two years include:
- Timesheets
- Work schedules
- Records of additions to wages (bonuses, raises)
- Records of subtractions from wages (deductions, withholdings)
Employee Self-Service
With employee self-service, you have an online employee portal where your staff can input their timesheets or time-off requests and view their pay stubs and tax forms.
Depending on your state, you may be legally required to have paper pay stubs available for employees. You must check with your state’s labor laws when using a payroll system with an employee self-service aspect.
Electronic Funds Transfer
An EFT is when one bank transfers money online to another. You have probably heard of direct deposit, a form of EFT used in paperless payroll systems. With EFT, employees’ paychecks are automatically deposited into their bank accounts (or to a pay card) on their regularly scheduled payday.
While many employees prefer the ease and accessibility of direct deposit, if you have an employee without a bank account, you will legally still need to be able to provide them with a paper check.
4 Step Process of How to Implement Paperless Pay
Now that you know what paperless pay systems are, let’s go over the four-step process of how to use paperless payroll.
Step 1: Review Your State’s Pay Stub and Direct Deposit Guidelines
Your first step in implementing paperless pay software in your business is to get familiar with your state’s labor laws. Some states allow you to make direct deposit mandatory and provide online pay stubs, but others require you to make paper checks and stubs available.
Step 2: Inform Employees About the Transition
Next, explain to your employees that you plan on transitioning from paper checks to direct deposit. You should let them know the timeline for the transition and explain the benefits of switching. Benefits you might mention include:
- Efficiency
- Accessibility
- They no longer have to worry about holidays, long weekends, or delivery delays affecting when they get paid
Step 3: Provide Tutorials and Training
Some payroll software include employee onboarding tools that you can use to teach employees how to use the system. You should ensure your staff knows how to:
- Log in to the employee portal
- Clock in and out
- Make time off requests
- Access their pay stubs and tax forms
Step 4: Introduce Direct Deposit or Pay Cards for Employees
Once your system is up and running and your employees know how to use it, you can start paying them. You can pay them with EFT going directly to their bank accounts or a pay card. A pay card is similar to a debit card, except an employee’s paycheck gets added to the card’s balance instead of deposited into their bank account.
