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A Guide To Paperless Payroll For Employers

by Christopher Nasiff on Mar 10, 2022 10:00:00 AM

If you’ve been completing payroll all by yourself, you know that it can be a frustrating and time-consuming process. In fact, small business owners spend almost 5 hours on payroll each pay period. You may be thinking about ways to ease the burden on your company and wondering if paperless payroll could be a good fit for your organization. Before you decide, there are a lot of factors to consider.

                           Download our free Complete Guide to Payroll Solutions and                                determine if outsourcing is right for you.

To help you understand why paperless payroll may be a good choice for you, here we’ll discuss:

  • What is paperless payroll
  • What are the benefits of paperless payroll
  • What are paperless pay options
  • How do I get started with paperless payroll
  • Are there any regulations to consider

After reading this, you’ll be able to decide if you should make the switch to paperless payroll to benefit your business and your employees. For more guidance about understanding the scope of payroll services—and how they align with your organization’s needs, consider downloading our complete guide to payroll solutions.

What is paperless payroll?

Paperless payroll is an entirely electronic payroll system. That means you can process every step electronically using payroll software or an outsourced payroll company without generating any paper, including:

  • collecting tax documents
  • time tracking
  • calculating and withholding taxes
  • paying employees
  • delivering paystubs and tax forms
  • tax filing
  • payroll record storage 

What are the benefits of going paperless?

By automating the process of running payroll, your organization and employees can realize many benefits. These include:

Employer Benefits

  • Greater accuracy: Since you won’t have to worry about manually calculating hours, wages, and deductions, you’ll reduce the risk of mistakes – critical to retention since just two payroll errors can cause 49% of employees to start looking for another job.
  • Improved efficiency: Instead of having to spend time processing payroll each pay period and responding to requests for pay records, a paperless system frees you and your staff up to focus more on growing your business.
  • Lower cost: While you’ll typically pay $200 to $250 per employee per year for outsourced paperless payroll, you’ll still save on labor, resources, and the cost of delivering paychecks. Businesses save between $2.87 and $3.15 per pay run by paying employees electronically.
  • Decreased environmental impact: By eliminating paper documents and shipping of paychecks, you’ll lower your carbon footprint.
  • Reduced storage requirements: Since all records will be stored electronically, you won’t need to waste valuable space accommodating large file cabinets at your workplace.

Employee Benefits

  • Timely payments: Since employees will receive their pay electronically either by direct deposit, pay card, or other digital methods, they won’t have to worry about checks getting lost or delayed due to weather.
  • Anytime, anywhere access: With access to a self-service portal, your employees can log in from a computer or phone to instantly check their pay history, paystubs, withholdings, and more.
  • Added convenience: With paperless pay methods, employees can avoid a trip to the bank to cash their checks.

How do I get started with paperless payroll?

Whether you choose to use your own payroll software or partner with one of the outsourced payroll companies available, there are several steps to get your organization set up for success.

  1. Select a payroll software or outsourced provider. With so many options available, you’ll want to do your research. Read news coverage on software and outsourced payroll companies, check with industry associations on recommendations, or ask peers about their experiences.
  2. Migrate your payroll data. You’ll want to make sure all your information is in the system, such as tax ID numbers, employee data, and pay history.
  3. Enroll employees in the self-service portal and provide training. Have your employees set up an account in the system and enter their personal, tax, and banking information that will be needed to process payroll. And be sure to teach them how to access their portal and features.
  4. Introduce your paperless pay method. Regardless of which paperless pay option you choose, it’s critical that you educate your employees on how to use it and what they can expect. As an employer, you should select the method that best suits the needs of your business. The 4 most common paperless methods are: 
    1. Direct deposit: With this method, wages are electronically transferred from your bank account into an employee’s bank account.  
    2. Pay cards: A pay card is a reloadable debit card onto which you deposit an employee’s wages each pay period. Employees can use the card just like they would any credit or debit card, including to withdraw cash from ATMs.
    3. Digital wallets: You can deposit paychecks directly into a digital wallet like a Venmo account or Apple Pay. 
    4. Instant pay apps: These phone-based apps allow employees to access earned wages before their regular payday. One of the most commonly used by employers is DailyPay.
  5. Program payroll reports. You’ll want to make sure you run the reports you need and get them scheduled to deliver by email to those who need them in your organization like HR or company executives.
  6. Integrate with your other software. Depending on what other software you use, you can take advantage of added efficiencies. For example, you can integrate with an electronic timekeeping system that will automatically import employee hours and sync your payroll journal entries with your accounting software so you can post them to your general ledger.

Are there any laws to consider with paperless-pay?

To provide paperless pay, you’ll need to first check your state law about any rules governing this approach. States may govern several aspects of paperless payroll, including:

  1. Offering paper checks as an option: Some states may allow you to provide paperless pay but only if you also offer paper checks as a payment option. In Illinois, employees must be offered the choice of payment by a check. In other places such as Maine, you can pay wages using electronic means like direct deposit or pay card as long as an employee can either make an initial withdrawal of the entire amount without additional cost or can choose another cost-free means of payment.
  2. Requiring consent: Other states require you to obtain employee consent prior to implementing paperless pay. . For example, in New Hampshire, employers can’t mandate direct deposit; workers must authorize it in writing. Likewise, in Connecticut, you can’t require direct deposit but can pay workers this way if they request it.
  3. Providing paystubs: Since paper paystubs go away when paper paychecks do, you’ll need to pay close attention to paystub rules. Certain states require you to give workers the ability to opt into (i.e. Hawaii) or out of online paystub delivery or mandate that you make paper paystubs available to employees. Even in states that allow electronic paystubs, you may need to give workers access to a means of printing them. For example, in Massachusetts, you can give out paystubs electronically as long as you provide a way for the worker to print out the information for free. Similarly, in Rhode Island, you can provide these statements digitally but must be able to provide employees with a printed or handwritten copy at no cost to them, if requested.

How to Choose the Best Paperless Payroll Option for Your Business

No matter what paperless pay approach you choose, you and your employees can both benefit. The key is to find the best option for your business. As you evaluate your choices, you may want to consider partnering with an outsourced payroll provider who can set up, implement, and process payroll seamlessly.

To decide if outsourcing may be right for you, read our next article on in-house versus outsourced payroll. To learn about payroll options with Complete Payroll Solutions, visit our dedicated payroll page.

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