As a business owner or non-profit director, it’s your responsibility to ensure employees are paid accurately and on time. But with so many provincial and federal regulations dictating the proper handling of deductions, payroll can be confusing, time-consuming, and costly - especially since missing established CRA reporting deadlines can result in penalty charges and interest being levied against your business.
As a non-revenue generating process that can quickly consume a company’s limited resources, it’s easy to understand why so many business leaders choose a convenient, secure, and cost-effective method for reimbursing their employees: direct deposit payroll.
What is Direct Deposit Payroll?
By adopting a direct deposit payroll system, wages and salaries are transferred electronically from your payroll account to the personal bank accounts of your employees. The process is simple. Your business sets up a designated account to transfer payroll funds from, and your employees provide you with their bank account information. When payday rolls around, paycheques are transmitted quickly and securely from your account to theirs.
Using direct deposit payroll provides multiple benefits to employer and employee alike, which may explain why it’s been mandatory for new Government of Canada public service employees since 1992! As a small business or non-profit employer, taking advantage of direct deposit allows you to make life easier for your staff, while simplifying your bookkeeping process.
Employer Direct Deposit Benefits
Direct deposit payroll can benefit your organization in ways that other employee pay processes can’t. For example, while there’s a certain appeal to paying wages in cash – especially for very small or very new companies - it isn’t always the best business practice.
Not only do cash payments make it tempting for workers to avoid declaring the income they receive from your business at tax time, failing to put employees on your payroll can prevent them from taking advantage of programs like the Canada Pension Plan and Employment Insurance.
At the same time, direct deposit is significantly more time and cost-efficient than printing out and distributing physical paycheques. Although there are typically fees involved in setting up and using direct deposit payroll, it can save your organization time and money, and help with cash flow in the long run by:
- cutting down on the purchase of paper cheques,
- allowing you to view transactions, reconcile accounts, generate financial reports, and providing you with a clear view of your cash flow as soon as payroll funds have been transferred (rather than having to wait until paper cheques have been cleared), and
- doing away with the need to investigate or reissue lost or stolen paycheques
According to information provided by the Canada Revenue Agency, opting for paper cheques over direct deposit payroll can cost your business as much as 4x more than implementing direct deposit measures!
Direct deposit also reduces the risk of fraud and theft (stolen cheques are a major source of identity theft) and eliminates the need to print and store vital payroll records and documents. Using direct deposit to pay your employees makes it easy to store payroll data securely in the cloud where it can be viewed and retrieved from anywhere, at any time.
Employee Direct Deposit Benefits
There’s no question that direct deposit makes getting paid that much more convenient for your staff. Not only do EFTs (electronic funds transfers) ensure personnel have immediate access to their wages on payday, employees also benefit by:
- not having to make a trip to the bank to cash or deposit a paycheque,
- not having to be present at work to get paid (funds go through automatically, whether it’s a day off for your employee, or they happen to be ill or travelling), and,
- not having to worry about losing or damaging a paycheque - or having it fall into the wrong hands - before they can get to the bank
Staff illness, technology outages, and security issues all have the potential to prevent your business from meeting its payroll obligations on time. By adopting a direct deposit system and payroll provider, however, you’ll avoid the risk of running late in getting your personnel paid.
What to Look for in a Direct Deposit Payroll Service
Whether your organization is new to payroll, or you’re looking to switch up your current process, it’s relatively easy to get started with direct deposit. One great option is to work with an experienced payroll management service that can provide you with accurate, reliable, and convenient payment processing and record-keeping.
The more employees you have, the more complex your payroll obligations are likely to be. At the same time, a larger staff probably means your business is growing. And outsourcing your payroll to a professional is an effective way to free up more time to focus on big-picture interests.
If you think partnering with a direct deposit payroll provider may be the right choice for your business, make sure you look for a bookkeeping service with a proven track record of working with companies like yours. As a minimum, they should have the capacity to:
- perform accurate calculations based on payroll details you provide,
- deliver a final payroll cost for your approval,
- process employee payments through direct deposit and provide digital copies of pay stubs,
- automatically issue T4s to employees at tax time, and
- provide ROEs (records of employment) to former employees in a timely fashion
Remember, unlike company cheques that can be lost or stolen, Payments Canada describes direct deposits as a safe, secure, and easy way to make and receive payments like wages and salaries. As long as your employees’ banking information is accurate – and there are sufficient funds in your payroll account – electronic transfers like direct deposit payroll are virtually guaranteed to end up where they belong.
At Enkel, we provide a reliable end-to-end Payroll Management service with accurate and timely direct deposits to your employees. For more information about our payroll services, or any of our other back-office solutions, contact us to learn more about how we can help streamline your business processes!