 | Larry Cheatham
is Vice President of Corporate Services (a division of Eby Corporation). Corporate Services provides Payroll Services to clients in and out of the construction industry. Larry holds a bachelor's degree from Harding University and a Master of Science from the University of Missouri. A resident of the Wichita area since 1978, Larry is a member of the Wichita Independent Business Association, Work Force Alliance of South Central Kansas, a national and local member of the Society of Human Resource Management (SHRM) and a past Chairman of the Maude Carpenter Children's Center Board of Trustees. Contact Mr. Cheatham at (316) 641-3123 or (316) 268-3571. |
Banking & Finance
2003-12-01 08:08:00
Tell me about direct deposit
: I understand that more companies are using direct deposit as the main method for paying their employees. What are the common types of direct deposit and what are the advantages of these methods for the employee and the employer? Can a company require employees to use direct deposit?
ANSWER: Direct Deposit is the term used to describe a form of salary payment where the employer electronically deposits a paycheck directly into the employee's designated bank account(s). Whether the employer can make direct deposit a requirement is a matter of state law. As you may suspect, these laws vary from state to state. In Kansas, this practice is allowed upon written consent of employee to employee's account at a financial institution. The employer must pay any service charges incurred for the first withdrawal of funds. (44-314, 49-20-1) An advantage to direct deposit for employees is that their pay is deposited into the designated account(s) on the same day and at the same time each and every pay period. Direct deposit can eliminate employee concerns of not being able to personally make a regular-type deposit when he or she is out of town, is ill or cannot make the deposit due to other personal reasons. An employee with one or more checking or savings accounts simply provides the employer with the name of the financial institution, the institution routing numbers and the employee account numbers. The deposit is made at no charge to the employee. For employees that do not have a financial institution account, the Debit Pay Card is an alternative to Direct Deposit. The debit pay card is similar to that of an automatic teller machine (ATM) card. Funds are deposited by the employer and can only be withdrawn by the employee using a personal identification number (PIN). Use of the debit pay card eliminates check cashing fees - which in Wichita can be as high as 3% of the total amount of the employee's paycheck ($15 for a $500 check). With the debit pay card, the employee pays only $1.50 for each ATM withdrawal. An added advantage of the debit pay card is that it can be presented by the employee as a cash alternative to pay for goods and services in the marketplace. The total amount of each purchase is automatically deducted from the card balance at the time of purchase. Employers find reduced costs through less inventory of check paper, bank reconciliation and check distribution from the practice of paying employees through traditional paper checks. Employers with sites in multiple states no longer need to be concerned with shipping or mailing delays of checks due to weather or disasters (such as September 11th). Employers should consult an attorney for specific concerns relating to state and local laws before implementation of a direct deposit or debit pay card program.
