Bite the Bullet: Mandatory Direct Deposit

No Comments

Dan WeissIn my previous article, I discussed the benefits of outsourcing payroll. Thinking about payroll led me to this week’s topic, mandatory direct deposit.

The Benefits

For an employer, direct deposit offers many benefits, including savings on the cost of check stock, reduced processing costs, improved security, and increased employee productivity.

In this modern age, nearly every employee sees the value of receiving a paycheck through direct deposit. It eliminates trips to the bank and waiting in line to cash a check on payday. There’s no waiting for funds to be available for withdrawal as can be the case with a paper check.

The Holdouts

Yet, there are always holdouts who insist upon receiving a paper check. Among the reasons I’ve heard are, “I don’t trust banks (aka “I don’t have a bank account”),” “I don’t trust my employer with my checking account number,” and “I want to feel my paycheck in my hands.”

Of these justifications, the most important concern is being able to accommodate employees who aren’t served by the traditional banking system. Thankfully, the payroll processing industry has developed the paycard, which allows an employee to receive a payroll direct deposit to a Visa/debit/ATM card without having a bank account.

Beyond that, the cost of dealing with less rational concerns is all too real.

Biting the Bullet

In a former life, I operated a multi-state retail chain, and paychecks were mailed biweekly to the outlying store locations. Almost always, they arrived by payday, but on the rare occasion when they didn’t, all hell broke loose. All productivity ceased. The frenzied “where’s-my-paycheck?” telephone calls began, and there seemed to be no way to sooth the pain my employees felt. The concern wasn’t “will-I-get-paid?”; it was “I-have-bills-to-pay-TODAY-and-I-need-my-money-TODAY.”

I always handled these conversations with empathy, but I also knew I wasn’t dealing with rational behavior. Our management team wrung its collective hands over the prospect of mandatory direct deposit, and eventually we bit the bullet. As paternalistic as it sounds, we knew we had to protect our employees from themselves.

As you might expect, the initial response from the few holdouts was less than enthusiastic. On the other hand, the furor died quickly and we never again dealt with the frustration of an employee not being paid on payday.

If you’re allowing a few holdouts to control your payroll processing, my advice is to give plenty of notice and advise your employees that, effective on a certain date, payroll will be paid by mandatory direct deposit. You’ll look back and be glad you made the decision.


Dan Weiss, founder and President of Counterpart CFO, leads a team of flexible, part-time CFOs specializing in nonprofitsTo read more from Dan, follow him on LinkedIn or subscribe to his blog at

Previous Post
Outsourcing Payroll Processing: A Smart Decision
Next Post
Predicting the Future: Budgets, Forecasts, and Projections

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed