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A long-term plan is a great tool for any business, with its benefits including the ability to attract and retain top talent. However, it can also be complicated or costly to implement.
This blog post outlines five ways that you can help cut costs while still ensuring your employees are paid on time and in full.
Paying employees is a big decision, and it’s important to make sure that you’re doing everything legally. This article will give you some tips on how to pay your employees without breaking the law. Read more in detail here: how to pay employees cash legally.
When it comes to remunerating their employees, employers have many alternatives. There are some more innovative choices to pick from, such as stock compensation, in addition to the more conventional payment methods (direct deposit, pay cards, paper checks, and cash).
You may be punished if you do not provide at least two alternative methods to pay workers in several jurisdictions. Each payment method has advantages and disadvantages that must be considered separately. Make sure you’re following best practices for the payment methods you choose.
Keep in mind that not all payment methods are available in all states. Make sure to examine your state’s rules and regulations before deciding on the payment choices you wish to provide your workers.
1. Making a direct deposit
Direct Deposit is the most frequent method of paying employees, with over 93 percent of American workers opting for this method. If you’re utilizing payroll software, direct deposit is also one of the simplest methods to pay workers. Payroll processing is entirely electronic—funds are sent from your bank account to your workers’ accounts—and you don’t have to do anything except examine and approve it. And, as an added plus, it’s frequently a service that comes at no extra charge. Some providers, like as Gusto, even provide on-demand pay, which allows you to deposit a portion of an employee’s salary early if they want money before payday.
You may still profit from direct deposit if you don’t use payroll software. To get started, all you have to do is go via your bank. Making these direct payments normally comes with a monthly and per-check cost, but certain banks, such as Wells Fargo, may waive the check price if the employee maintains a bank account there. Monthly costs may be anything from $10 to $30 or more, with check fees typically ranging from If you’re not using payroll software, you can still reap the benefits of direct deposit. You’ll just need to go through your bank to set it up. There is usually a monthly and per-check fee associated with making these direct payments, but some banks, like Wells Fargo, won’t charge you the check fee if the employee has a bank account there. Monthly fees can range from $10 to $30 or more, and check fees are usually between $0.50 to $3.00 each..50 to $3.00 per check.
Full payroll services are now available from several institutions, such as Bank of America and SunTrust Bank. Make sure to ask about the payroll service they use so you may conduct your own research ahead of time. They often employ widely available systems like as QuickBooks Payroll, which you may sign up for on your own.
Tip: If you utilize your bank’s online payroll processing service, be sure you’re not overpaying for services you might obtain for free by joining up with a payroll provider directly.
The Benefits and Drawbacks of Paying Employees via Direct Deposit
Check out our tutorial if you want to learn more about paying your staff by direct deposit.
2. Pay using a credit card
Employers are delivering paychecks to workers using pay cards, which is a newer method. It’s a kind of prepaid debit card that you may use to deposit your paycheck. When you have workers who don’t have bank accounts, this is an excellent choice to utilize. It enables you and your employees to enjoy the advantages of direct deposit while removing some of the drawbacks.
Aside from the cost of the service, some payroll software offers payroll cards for little or no cost. You may also check with your bank, since many of them now offer pay cards, which are FDIC-insured.
Many states prohibit companies from requiring workers to receive their wages only via pay cards. If you don’t verify your state’s regulations before deciding how to continue, you might risk fines and/or legal action. Regardless, we suggest that you pay your staff in a variety of methods.
Paying Employees With Pay Cards: Pros and Cons
Check out our guide if you want to learn more about paying your staff using pay cards. Check out our guide to the top pay card issuers for small companies for more information.
3. Make a paper check
Some businesses may consider paper checks to be antiquated, yet they are still a solid means to pay workers for their labor. Depending on how you’re processing the check, it’s quite straightforward. You may either use your payroll software to print them or write them by hand. Handwriting checks is less expensive (unless you print them for free online), but it takes more time, particularly as your firm expands.
Whether you prefer to print your paychecks, check with your bank to see if they have positive pay choices. Positive pay is an automatic fraud protection tool that compares the information on cashed checks (account number, amount, and check number) to a list of checks you’ve uploaded to the bank’s system and allowed for payment. The bank will reject a cheque written on your company’s behalf that has not been approved by you.
The Advantages and Disadvantages of Paying Employees With Paper Checks
Check out our tutorial if you’d want to learn more about paying your employee using checks.
4. Cash
The majority of firms that provide cash paychecks are tiny and employ just a few people. Those personnel are generally hourly or part-time workers. Paying thousands of dollars in cash every pay period is inefficient, so figure out how much you’ll need to pay out in total each paycheck before going this way.
We don’t normally advise companies to pay their workers in cash since it increases the risk of being audited by the IRS, but it is a possibility if you’re careful to keep an audit trail. It’s critical that you understand how to process payroll (including taxes), keep track of any payroll-related debits from your bank account, and generate pay stubs for both your employee and your company. Keeping track of your paycheck in Excel or using payroll templates might help you keep organized.
The Benefits and Drawbacks of Paying Employees in Cash
Visit our tutorial to learn more about how to lawfully pay your staff with cash.
5. Shareholder Compensation
Although not as prevalent as the other methods we’ve examined, some firms do pay workers in shares. Unless you have a specific agreement and the stock has worth, we don’t advocate utilizing it to pay your whole paycheck.
It’s usually supplied as a perk to make the organization more appealing to potential prospects rather than as a substitute for their salary. Stock isn’t normally worth much in the beginning, particularly for smaller enterprises, so future rewards aren’t assured.
One thing to keep in mind is that, like ordinary payroll, you’ll have to pay payroll taxes on the stock payout. The only difference is that it won’t be until the stock vests, which means the person must work for the firm for a specific amount of time before the stock transfer becomes theirs. Many firms wait five years before enabling employee stock to completely vest, although a partial vesting period frequently occurs around the third year.
The Benefits and Drawbacks of Paying Employees with Stock
Other Options for Increasing Employee Paychecks
These final two options will never be a viable alternative to paying staff. Many people consider health insurance and discounts to be employment perks. Regardless, these are just a few of the methods you may use to boost your workers’ salary.
Contributions to Health Premiums
Employees may save a lot of money by contributing to their health insurance plans. Any money you provide is like adding to their take-home pay, particularly for individuals who would get health insurance anyhow. Premiums may be costly, with some topping $1,000 per month, so look at your budget to see how much you can spend on each employee.
You are not need to pay the whole payment. We suggest familiarizing yourself with the Affordable Care Act if you have 50 or more workers. You may be on the verge of being compelled to offer insurance for your workers; if so, be sure you contribute the minimal amount necessary by the government in order for the plans to be reasonable.
If the employee’s needed contribution for the lowest-cost self-only health insurance option does not exceed 9.5 percent of their salary, the plan is deemed affordable. If it does, you’ll need to raise your contribution to stay in compliance.
Pros and Cons of Paying Employees With Contributions to Health Premiums
Discounts
Employee Benefits on goods and services you offer and Discounts for Businesses on products and services from other firms are two ways you might compensate workers with discounts. Employees may utilize them at their leisure, and if the reductions relate to products they currently make, they can truly benefit from the savings.
- Employee Benefits
- Discounts for Businesses
Some companies, such as restaurants and coffee shops, find it simpler to give discounts than others. Employees normally take at least one break throughout their shift, and everyone eats. In this case, it’s simple to provide a 20% discount to workers so they don’t have to pack a lunch or even prepare supper for their families after work.
You should keep note of any discounts taken in your accounting system so you know how much your workers are taking advantage of this offer. Also, as long as you’re providing a maximum of 20% off your product or service’s standard price, the employee won’t have to include the discount in their income (which means it won’t be taxed, which is a win-win for both of you).
Employers can give Discounts for Businesses through an employee discount program. Some payroll services like ADP and TriNet provide them if you sign up for one of their products. These partnerships are already set up and give your employees access by providing promotion codes they can enter when making a purchase. The discounts are usually between 5% and 15% and may include big name companies like Enterprise Rent-a-Car and AT&T.
Another approach is to form direct partnerships with firms that you utilize in your company. Because they have so many lines available, some firms that issue corporate cellphones may negotiate reduced prices. They may also be able to pass on these prices to their workers for personal usage.
You would add workers’ personal mobile lines to your account at their desire and take a premium from their paychecks to manage it in this instance (similar to how health insurance is handled). You may make as much or as little of a contribution as you wish.
If you decide to provide a benefit in-house, make sure you have a flawless structure in place so you don’t end up paying expenditures for workers after they depart. Also, make sure that workers understand that the discounts are solely for them and not for their friends and family.
The Benefits and Drawbacks of Offering Employee Discounts
Conclusion
You should pick payment options that are appropriate for your company and team when it comes to paying your workers or contractors. Some methods, such as paying your employees in cash, may seem to be simpler on the surface, but they can bring you problems in the long run.
Remember to withhold payroll taxes from each paycheck and keep track of all earnings so you can pay your share of employment taxes. It’s also crucial to pay attention to the demands of your unique staff. Is it true that they have bank accounts? What matters to them the most: convenience, discounts, or cash? Whatever you choose, be sure you have a good system in place to keep track of it.
The “methods of paying employees quizlet” is a quiz that will help you determine the best way to pay your employees.
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