Companies spend almost $33 billion each year on printing, sorting, and mailing checks. And, although the U.S. banking system is secure, more opportunities exist for fraud, whether through alteration, mutilation, reproduction, or forgery, as checks move through the economic system prior to their deposit.
According to one report, total check fraud losses in USA can run as high as $50 billion annually, with 1.2 million worthless checks in the banking system each day. A simpler, more cost-effective, and safer method for paying employees is available, and a significant number of companies are turning to paperless payroll through electronic distribution.
In fact, the Electronic Payments Association states that in 2004 more than 60% of consumers had their salaries and other payments direct deposited into a bank account, up more than 4% from 2003.
These deposits saved businesses anywhere from $1,000 a month to more than $15,000 a month, depending on the size and infrastructure of a company. That translates into annual savings of $12,000 to $180,000. Savings occur by eliminating check processing fees, including bank charges, forms purchasing and shipping, and lost employee time managing paper based payroll printing systems. In fact, according to the results of one study of payroll professionals, the average paper savings experienced by moving to a paperless payroll was 34.5% with about 1 in 5 respondents affirming at least a 90% reduction in paper. This report discusses the benefits of paperless payroll and explains how UltiPro Workforce Management is helping businesses save money, while empowering their employees, through electronic pay stubs.
What Is Paperless Payroll?
When the American Payroll Association (APA) conducted its 2003 survey, “Getting Paid in America,” it asked respondents how they would feel if their company went to a paperless payroll with the ability to view pay stubs online and print them as needed. With 14,061 individuals responding, more than 70% of them said that they’d be pleased by such an event. So why are some companies resistant to a paperless pay environment, especially when problems occur 20 times more frequently with paper than with direct deposit? The answer most often adds up to three reasons:
1) The perception that many of their employees do not have Web access
2) Legal concerns
3) Maintenance of employees’ direct deposit data
Web Access to Paychecks
Many companies whose workforces may not routinely have access to the Web during the course of their regular workday – such as manufacturing plants – are overcoming that roadblock by letting employees view their paychecks through an intranet using PCs or kiosks set up on the plant floor. The approximate cost of depositing a paycheck in person to a financial institution is $8.44, which comprises time spent traveling to and from the bank, round-trip travel expenses, and time spent waiting in line, not to mention the fact that consumers spend more than three workdays each year going to a bank. In addition, some employees who do not have bank accounts incur check cashing costs. Other companies offer computer discount programs or matching funds to encourage the purchase of a home computer.
In June 2000, President Bill Clinton signed into law the Electronic Signature in Global and National Commerce Act (E-SIGN), eliminating barriers to the use of electronic signatures and records, while also providing consumers with specific protections. With E-SIGN, employees cannot be required to receive electronic paychecks, they must affirmatively consent to their use, they must receive notice of their rights in advance, and their affirmative consent must be made electronically to demonstrate that the employee has access to his or her data.
Electronic pay statements must include all of the information required by state labor codes and must be available to employees by payday. While employers cannot force workers to switch to paperless paychecks, companies in some states can require that new workers accept direct deposit and paperless stubs.