Study: 27 Percent of Employees Get Paper Paychecks

Exerpted from the July 2010 issue of AFP's Payments Newsletter. Receive the full newsletter: www.afponline.org/paymentsnewsletter

Less than three-quarters of employees receive payments through direct deposit, according to PayItGreen, a NACHA-led coalition that advocates the use of environmentally friendly payments methods. The national 2010 PayItGreen Survey, undertaken by Javelin Strategy & Research, found that 27 percent of employees still receive paper paychecks, most of them because their companies do not offer direct deposit services, NACHA said.

Janet O. Estep, president and chief executive, called that finding "surprising."

"Direct Deposit is the simple, safe, smart, and green solution for employers, and we hope businesses, small and large, become more aware of the benefits of Direct Deposit," Estep said.

According to NACHA, companies can save from $2.87 to $3.15 per payment by turning to direct deposit. There is also a benefit for employees: People spend between 8.5 and 24 hours each year traveling to their bank or credit union to cash or deposit checks. That accounts for a productivity loss between $3 billion and $5 billion annually.

That’s not to mention the environmental cost.

Despite the savings, though, small businesses continue to shun direct deposit, the survey shows. At companies with fewer than 100 employees, only 48 percent get their paycheck directly deposited. That number falls further in companies with 30 employees are fewer. Almost 80 percent of employees who said their companies do not offer direct deposit worked at a company with fewer than 100 employees.

"There is a significant opportunity for increased Direct Deposit use in the small business community," said Estep. "Small businesses may not be aware of the benefits of offering Direct Deposit, including time and cost savings, efficiency, convenience, and environmentally-friendly payroll. I encourage businesses to look closely at the positive impact Direct Deposit can have on the entire payroll process, and employees to ask their employers about Direct Deposit."

Another payment method increasing in popularity is the use of payroll cards. Companies often use prepaid plastic to increase enrollment in direct deposit programs