Can I Require My Employees to Use Direct Deposit?

July 27, 2016

Direct deposit

96% of U.S. employees receive their paycheck via direct deposit, according to an American Payroll Association survey. There are many benefits of having direct deposit: saving employees a trip to the bank, reducing employer costs on paper checks and cutting down on paper waste. But can this useful, popular deposit method be a requirement for your employees?

Depending on the state laws, employers can require their employees to receive payments via direct deposit. Receiving direct deposits can even be included as a condition of employment in some states. The restrictions are:

  1. No employer can require an employee to use direct deposit at a specific bank.
  2. Employers aren’t allowed to charge employees fees based on payment method.
  3. Employees must have access to their pay stubs.

If an employee does not have a bank account, direct deposit payments can still be made via a paycard.

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. Federal law does not mandate pay stubs for workers, but the Fair Labor Standards Act requires employers to keep accurate records of employees’ wages and hours worked. Your state might not require employer-issued pay stubs, but an employee has the right to request payroll records.

For instance, printed pay stubs are mandatory in Arizona, Colorado, Connecticut, Hawaii, Iowa, Maine, Minnesota, New Mexico, North Carolina, Texas and Vermont. However, most of these states now allow employers to use electronic pay stubs as long as three standards are met:

  1. Employees can access the pay stub electronically
  2. Employees have a unique, secure login
  3. The pay stubs can be printed out

Several states do not require you to provide pay stubs all: Arkansas, Florida, Louisiana, Mississippi, Nebraska, South Dakota, Tennessee and Virginia. The remaining states require some type of pay stub, whether in print or available electronically, such as Paycor’s Online Check Stubs or Employee Mobile app.


Get in touch with us to find out how Paycor can streamline your payroll process.


Source: The Nest


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