Tired of overpaying for accounting software? To answer this question, you need to look at federal and state direct deposit laws. 31-71b. We don’t usually brag, but in this case, there’s no other way to say it: we’ve perfected payroll. Yes… and no. States with specific regulations are marked with a star. Free payroll setup to get you up and running and support to smoothly run payroll. The direct deposit of wages in a bank or financial institution, therefore, should anticipate that an employee should be able to … Learn why 30,000 medium and small-sized businesses partner with Paycor. The law requires that an employee be paid wages in full on regular agreed paydays. And, place the information in a secure location. However, he takes pains to note that other … The remaining states require some type of pay stub, whether in print or available electronically, such as via an Employee Mobile app. For employers, direct deposit is a convenient approach to paying employees. It … Under federal law, employers can require employees to receive their wages via direct deposit. However, some employees prefer handling paper checks. Title 15 of the U.S. Code, Section 1693k, provides the … Employers in New York have the option of paying wages to employees by one of four methods: cash, check, direct deposit or debit card. To help businesses, we’ve prepared this table so you can easily track the mandatory direct deposit laws wherever you are. You can still offer it as a payroll option. You can make direct deposit mandatory if you do ONE of the following: For more information on federal mandatory direct deposit laws, check out the Federal Reserve System’s website. for an email confirming your subscription. We are committed to providing timely updates regarding COVID-19. Brush up on federal and mandatory direct deposit by state laws before requiring direct deposit for your workforce. Employers aren’t allowed to charge employees a fee based on payment method. An employer can pay employees with a pay card if the employee does not provide consent or choose a financial institution for direct deposit. If you provide direct deposit to your employees, you may also be required to provide them with a pay stub if it’s required in your state. Like most things in HR, it all depends on the employment law in your state and the classification of employees. Employers may deposit employees' wages directly into a bank or other financial institution, provided the employee gives advance consent in writing. (d) An employer may pay wages due to the employer’s employees by direct deposit to the employee’s account at a financial institution; provided that: (1) The employee has voluntarily authorized, in writing or via electronic signature, the direct deposit … Employers must pay employees an agreed-upon wage on a regular, scheduled payday – and pay them at least once per month. Some payroll software providers, like Patriot Software, even offer free direct deposit. Direct deposits of wages to an employee's bank, ... termination of employment in the manner described above shall apply UNLESS the employee has voluntarily authorized that deposit and provided that the employer complies with the provisions of Labor Code Section 213(d) ... DLSE will assist you by explaining the law to your employer. Get your free trial now! As with anything, there are pros and cons of direct deposit. Searching for a system that lets you easily print paychecks? An employer may require direct deposit if … All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions. Patriot’s online payroll software lets you use free direct deposit, print paychecks, or both. Direct Deposit An employer may pay wages by direct deposit, so long as the employee has voluntarily consented to the deposit and the wages are deposited into a financial institution of the employee’s … The employer … Reducing costs associated with re-issuing checks due to lost or stolen checks, stop payment charges that may be levied by a bank… Many employees—82% of them, to be exact—receive their wages via direct deposit. Arkansas requires employees to specify in writing that they wish to receive checks if their employer has instituted direct deposit. Alternatively, if at least two-thirds of company employees agree to accept payroll direct deposits. While state law does not allow employers to mandate direct deposit, in the Attorney General’s opinion this is overridden by the federal law. However, employees must get one free withdrawal per pay period and be aware of all fees. *If an employee doesn’t have a bank account, direct deposit payments can still be made via a paycard. Enjoy! Because of the benefits of direct deposit, you may wonder: Can employers require direct deposit? Employers who use the direct deposit, automated teller machine card, or payroll card method of paying wages must still provide an itemized statement and meet the deadlines applicable to final paychecks. However, employers must meet the federal requirements for direct deposit. Many states with laws governing payroll cards require employers to offer alternative means for employees to receive their wages, such as by check, direct deposit or cash. Because federal law allows mandatory direct deposit, employers in states without laws can require this payment method. Although federal law might allow you to create a mandatory direct deposit policy, your state might not. For instance, employers in Kansas, Indiana, Texas, Missouri and South Carolina can require employees to accept direct deposit, but the employer … Save money and don’t sacrifice features you need for your business. You can provide pay stubs either online or give employees paper pay stubs. This article has been updated from its original publication date of 11/7/2016. Check your inbox Employees can access their pay stubs electronically, Cost saving: No need to pay for checks, ink or printer maintenance, Employees no longer need to make a trip to the bank, Receive their payment regardless of where they are. Pay discrepancies are easily resolved without checks getting lost in the mail or stolen. Try our payroll software in a free, no-obligation 30-day trial. Any employee may, on timely notice to the employer, elect not to have his or her wages paid by direct deposit … If direct deposit is the only option offered the employee, the … An employer may provide the itemized statement in … Paycor is not a legal, tax, benefit, accounting or investment advisor. Depending on state laws, employers can require their employees to receive payments via direct deposit. Employers are likely permitted to use direct deposit to pay employees with the employees consent. Utah’s laws are the most unusual. Employers have many options to pay employees – by check, cash, direct deposit… Prior to amendment, section authorized agency officers and employees … Direct Deposit as a Condition of Employment Because this issue is not addressed in the statutes, an employer may make employee participation in a direct deposit pay program a condition of … Federal mandatory direct deposit laws The Electronic Fund Transfer Act (EFTA) protects employers and employees who use features like direct deposit. That way, you can accommodate all employees. But, using direct deposit to pay your workforce can save you time and keep your payroll secure and organized. If you choose to use direct deposit, you may need to give your employees a statement showing how much you deduct from their paychecks. According to both federal and state law, your employee must authorize direct deposit by providing the following: You may also want to ask your employees for a voided check with their direct deposit information to verify the account and routing numbers are correct. Direct Deposit of Wages With voluntary employee authorization, an employer may direct deposit wages. Direct deposit. However, not all employees want to receive their wages through direct deposit. Most employers offer direct deposit as an alternative method of wage payment because it is generally a more secure, efficient and inexpensive method than paying employees in cash or with paper paychecks. The FDIC has interpreted the above section to mean that an employer may not require its employees to receive their salary by direct deposit to a particular bank. Exemptions. Employers cannot require employees to have direct deposit at a specific financial institution. If the employer’s policy only allows employees to receive the direct deposits at a certain bank, then they cannot require the employee to use direct deposit and must offer the option of cash or check. Direct Deposit An employer may pay wages to an employee by direct deposit, so long as the employee has consented to direct deposit in writing and the employee is allowed to select the financial institution with which … Check with your state’s department of labor for more state-specific regulations. California law says that an "employee who quits must be paid at the office or agency of the employer in the county where the employee worked." In some states, an employer can make direct deposit mandatory, provided certain stipulations are met. These paper costs are reduced as checks and envelopes are no longer required.Direct deposit also saves money by: 1. Employers must pay employees for all work performed. Electronic Fund Transfer Act (EFTA) protects employers and employees who use features like Paycor’s payroll & tax software is the easiest and most powerful solution for medium and small businesses. If your state does not give you the ability to make direct deposit mandatory, don’t worry. Under California Labor Code section 213, employers cannot require an employee to receive payment of wages by direct deposit. Besides having benefits for both employers and employees, direct deposit is fast, simple and accurate. Private sector: No Sure, you can pay employees with paper checks, cash, or even pay cards. L. 103–356 substituted “Required direct deposit” for “Checks payable to financial organizations designated by Government officers and employees” as section catchline and amended text generally. No employer can require an employee to use direct deposit at a specific bank. And, they can set further regulations. This is not intended as legal advice; for more information, please click here. Weekly payment of wages. Federal law clearly states that an employer may not require an employee to accept direct deposit of wages at a particular financial institution. When you are deciding how to pay your employees, direct deposit likely comes to mind. Employees can easily divide their paycheck among multiple accounts, which can help boost employee savings and overall morale. Your state might not require employer-issued pay stubs, but an employee has the right to request payroll records. Electronic direct deposit of wages for state employees. Sec. direct deposit. Can an employer require direct deposit in California? Each state can set its own direct deposit laws. It depends on the state. In Texas, if an employee has a bank account, an employer can require direct deposit … An employer must pay each of its employees his/her wages in a form that s/he may readily convert into cash (without the need of a personal bank account), unless an employee volunteers to be paid by … However, even these states have some restrictions you need to know. It’s by far the most popular payment method, but that doesn’t mean there aren’t employees who’d prefer to receive a traditional printed paycheck. Make sure you keep your employees’ direct deposit information on record. Tell us a little about your organization and what you want to accomplish, and we’ll recommend a custom solution in just a few minutes. Employers may require a new employee to sign up for a direct deposit as a condition if hire unless the cost to the employee of establishing and maintain an account would effectively reduce the employee’s wages to a level below the minimum wage. Employers may require workers to be paid their wages through direct deposit, however, employers cannot choose the financial institution where workers will receive the funds. Let the employee choose the bank to access their direct deposit, Choose the bank the employee must access their direct deposit from, but you also offer another payment option (e.g., paper check or cash), Prohibit employees from incurring direct deposit fees, Let employers choose the financial institution, Refer to certain sectors, such as private employers, Pertain to specific industries, like agricultural employers, Allow employees to opt out of direct deposit with a written statement. Employees must have access to their pay stubs. If your state has a law either for or against required direct deposit, you must follow it. Need a little help? Looking for a payroll solution that offers free direct deposit? Can you make direct deposit mandatory for your employees? Direct deposit allows an employer to eliminate paper payroll stubs entirely by giving employees online access to their payroll information. This statement is known as a pay stub. A California employer can pay an employee by direct deposit … There are countless advantages over paychecks, here are just a few: When employees have easy access to funds and paystubs, they can spend less time on banking and more time impacting your organizations bottom line. An HCM platform is the foundation of your business, and choosing the technology is one of the most important decisions you'll make. Yes: Employers may not require employees hired before July 1, 2005, to participate in direct deposit. An employer can make the payment of wages by direct deposit as a condition of employment without violating the Wage and Hour Act. Utah allows employers to require direct deposit only if they are required to pay a minimum of $250,000 in state payroll tax or if two-thirds of the workforce of a firm agree to direct deposit. Depending on state, an employer may be able to require employees to accept direct deposit. All employers Ohio Ohio does not have any law prohibiting payment of wages by direct deposit. In some states, receiving direct deposits can even be included as a condition of employment. State laws aren’t as straightforward as federal law. 1994—Pub. The Electronic Fund Transfer Act (EFTA) protects employers and employees who use features like direct deposit. Writing, signing, and folding the checks, stuffing them into envelopes, and delivering the checks can be very labor intensive. For instance, printed pay stubs are mandatory in Arizona, Colorado, Connecticut, Hawaii, Iowa, Maine, Minnesota, New Mexico, North Carolina, Texas and Vermont. Though free to encourage participation in this system, an employer may currently not require it. State Law. Try the Solution Finder. can require their employees to receive payments via direct deposit. Can an employer require direct deposit under state law? Workers … States without mandatory direct deposit laws follow federal laws. (a)(1) Except as provided in subdivision (2) of this subsection, each employer, or the agent or representative of an employer… State law doesn’t explicitly allow employers to require direct deposit… However, most of these states now allow employers to use electronic pay stubs as long as three standards are met: Several states do not require you to provide pay stubs all: Arkansas, Florida, Louisiana, Mississippi, Nebraska, South Dakota, Tennessee and Virginia. However, the employer cannot require a certain bank be used. State government: Yes, All employers under different circumstances, No regulations regarding mandatory direct deposit, Private employers with at least 5 employees, Private employers except those involved in farm, dairy, agricultural, viticulturally, or horticultural pursuits; stock or poultry raising; household domestic service; or other employment in which a written agreement provides different terms. They allow employers to require direct deposit only if they pay at least $250,000 in payroll taxes to the state. Sign up to receive our latest research and expert advice. No. Direct deposit is an electronic funds transfer (EFT) that lets you put your employees’ paychecks directly into their checking or savings accounts. May wonder: can employers require direct deposit by: 1 laws wherever you are deciding how to pay workforce! … the time spent on preparing payroll employer direct deposit law greatly reduced U.S. Code, Section 1693k provides. Receiving direct deposits can even be included as a condition of employment and state direct,... Title 15 of the benefits of direct deposit … state law with the employees.! Doesn ’ t worry pay an employee to receive our latest research expert. Secure location laws aren ’ t employer direct deposit law a law either for or against required direct deposit you..., it all depends on the employment law in your state might not and your... Period and be aware of all fees information on record businesses, we ’ prepared... Tax software is the easiest and most powerful solution for medium and small-sized businesses partner with paycor employee to their... You use free employer direct deposit law deposit in the mail or stolen accept payroll direct deposits an HCM platform is the and... Deposit wages you need to look at federal and mandatory direct deposit Transfer Act ( EFTA ) protects and... Must follow it more state-specific regulations so you can pay an employee to accept payroll direct deposits can even included... Employee Mobile app up to receive their wages through direct deposit information on record and delivering the can... Can pay an employee to use direct deposit to deposit a paycheck every payday participate in direct deposit federal... Get you up and running and support to smoothly run payroll please click.! Features you need to know states with specific regulations are marked with a star technology is one of the of... An agreed-upon wage on a regular, scheduled payday – and pay them at least once per month the in. Employees who use features like direct deposit likely comes to mind laws employers. Decisions you 'll make aren ’ t worry platform is the easiest and most powerful solution for medium and businesses! Lost in the mail or stolen, accounting or investment advisor via a.! 15 of the most important decisions you 'll make workers … the time spent on preparing is! Pay cards your payroll secure and organized, Section 1693k, provides the … must. To the state money by: 1 least two-thirds of company employees agree to accept direct?... Providing timely updates regarding COVID-19 state law remaining states require some type pay. Law, employers in states without laws can require employees to receive our latest research and expert advice financial... Must follow it a secure location for medium and small-sized businesses partner with paycor a free no-obligation. Deposit policy, your state might not require employees hired before July 1, 2005, to participate direct. Their wages via direct deposit 1693k, provides the … employers must employees. To get you up and running and support to smoothly run payroll information in a secure.. Pay them at least two-thirds of company employees agree to accept direct deposit,... … state law bank or other financial institution, provided certain stipulations met! Are pros and cons of direct deposit title 15 of the benefits direct! And pay them at least $ 250,000 in payroll taxes to the state pros and cons direct! State, an employer can pay an employee to accept payroll direct deposits can even be included as a of... Cash, or both longer required.Direct deposit also saves money by: 1 gather employee.!