Exploring different types of payroll options

Quick insights

• Employees may receive payroll payments in a variety of different ways, including checks, direct deposit, pay cards, cash and mobile payments.
• Direct deposit is a common payment option.
• Seasonal employees and those without bank accounts may be paid via pay cards.

When you start a new job, you may be looking forward to your first payday. But before you get paid, you will generally need to choose a payment option from your employer. In the past, payroll checks on payday were common. But today, there is a range of payment options that could allow you to receive payment quickly and effectively.

Selecting the right payment method and processes can help you receive your pay in an efficient manner. Read on to discover more about payroll options and find out which may be ideal for you.

Types of work payments to employees

Today’s employees may have a variety of payment options to choose from, including checks, direct deposit, pay cards, cash and mobile wallets. Let’s explore how each payment method works.

Checks

Businesses with a checking account can typically issue paychecks to employees, which can be printed or handwritten. Checks are either mailed or delivered in person, generally accompanied by a paystub detailing earnings and deductions for the pay period.

However, there are potential downsides to receiving payment via check. Employees without a checking account may incur fees to cash their checks. Additionally, employees need to be careful to avoid losing checks before cashing them. If an employee loses a check, they cannot receive payment unless they coordinate with their employer to receive a replacement.

Checks may be a straightforward, simple option for seasonal or temporary employees, though.

Direct deposit

Many employees receive pay from their employers via direct deposit. With this payment method, funds are transferred electronically from an employer’s account to the employee’s account. This method provides accurate, accessible records and allows for relatively easy correction of errors.

Employees must have a checking account for direct deposit. Some banks offer early direct deposit, enabling employees to access funds before payday. Setting up new employees may take a few weeks.

Employers may be legally required to notify employees and obtain authorization before setting up direct deposit. Because of this, employees will need to ensure they complete the setup process prior to receiving payment.

Pay cards

Pay cards, or payroll cards, allow employees to receive payment via prepaid debit cards. This payment method can be convenient for employees without traditional bank accounts.

Pay cards are often used by employers with temporary workers or in industries such as agriculture, construction or hospitality, where some workers lack traditional bank accounts. Workers in these industries may be less likely to have a bank account partly due to misunderstandings about documentation requirements for non-residents opening a bank account.

Pay cards function similarly to debit cards, allowing purchases or cash withdrawals at ATMs or through bank tellers.

However, payroll cards can be lost or stolen, and ATM withdrawals may incur fees. Some states may require employers to cover certain fees associated with card use. If you receive payment via this method, you may want to research your state’s specific payroll card regulations.

Cash

Receiving payment in cash may help you avoid fees associated with checks, pay cards and direct deposit. This payment option is sometimes preferred by small businesses. Paying in cash is typically legal, providing that the employer complies with employment law and takes out the proper deductions. As cash lacks the paper trail that comes with other payroll methods, recordkeeping is crucial on both the employer and employee side.

While some employees may prefer cash, it cannot be replaced if lost or stolen. Employees with online- only banks may struggle to deposit cash, as some ATMs do not accept cash deposits.

Mobile wallets

Mobile or digital wallets offer another payment option, allowing employees to receive funds directly through a mobile wallet. Once payment is deposited, the employee can use the mobile wallet to make purchases directly or transfer funds to a bank account via a debit card or routing information.

Some mobile wallets provide linked debit cards, but they may not offer all the benefits of traditional checking accounts. Mobile wallet balances typically don’t earn interest and are not FDIC insured.

While transferring money to others may not result in a fee, withdrawing funds from a mobile wallet usually incurs a fee.

In summary

Employees have several options for receiving money from their employer, including checks, direct deposit, pay cards, cash and mobile wallets. Note that available payment options may differ depending on your employer. Direct deposit is used by many employers and may be ideal for employees with traditional bank accounts.

Each payment method has its own advantages and disadvantages. Checks, pay cards and mobile wallets may be preferable for temporary workers or those who do not have bank accounts. Since cash payments don’t create the same paper trail as other methods, meticulous recordkeeping may be particularly important.