Thanks to technology, you can do almost everything online. That includes many parts of your payroll process. There are many reasons to use paperless payroll, including cost savings and environmental benefits. But, is paperless payroll legal?
Is paperless payroll legal?
The short answer is, “yes.” Paperless payroll is legal. But, paperless payroll state laws can vary, and you might need to consider special aspects of payroll programs in your state.
Pay stubs
Federal laws do not require that you provide employees with pay stubs. However, most states do have laws for pay stubs.
Some states (e.g., Alaska) require employers to give employees access to pay stubs, which can include electronic access. Some states, like California, go even further and say employees must have access to pay stubs and a way to print them. A few states (e.g., Delaware, Minnesota, and Oregon) require employers to give employees the opportunity to opt out of electronic pay stubs, meaning employees can choose paper pay stubs. And, one state (Hawaii) requires employees to opt-in to, or voluntarily choose to receive, electronic pay stubs. Otherwise, you should give Hawaiian employees paper pay stubs. There are states that don’t have requirements (e.g., Georgia and Florida), so employers can choose how to give pay stubs to employees.
Knowing pay stub responsibilities is a must.
Download our FREE whitepaper, Understand Your Pay Stub Responsibilities, for pay stub laws, examples, and recordkeeping rules.
Payments
You can also use paperless methods to pay your employees. You no longer have to print or handwrite checks.
Direct deposit is a popular paperless payment method. There are many benefits of direct deposit for employees. You can quickly transfer the paycheck to the employee’s bank account, which means your employees have instant access on payday. Since employees must have a bank account to use direct deposit, this might not be the best option if you have many unbanked employees.
Can employers make direct deposit mandatory? Each state sets its own direct deposit requirements. In some states, employees can refuse direct deposit. Make sure you know your state’s rules before you set up direct deposit for your employees.
Pay cards are another paperless method you can use to pay employees. So, what is a pay card? Pay cards are essentially reloadable debit cards onto which you can load an employee’s pay. These cards are good for employees who do not have bank accounts. However, pay cards often come with fees that can cut into the employee’s wages.
Pay cards must meet certain federal requirements. Many states also have laws regulating the use of pay cards. Check your state’s laws about payroll cards to find out which regulations apply specifically to you.
Employment forms and recordkeeping rules
You can take your paperless payroll program even further with all the forms associated with employment and payroll. You can store most forms electronically.
The recordkeeping rules for each form are different, so you will want to check the requirements. In general, you will need a way to print the forms if a government agency ever asks for them. You need to make sure the records are secure, and that only the authorized people can see them.
Patriot’s online payroll software can help you create a paperless payroll program. You can pay employees with free direct deposit and employees can view their pay stubs electronically. If you add on our inexpensive HR software, you can store paperless documents. And, you can try all of this for free!
This article is updated from its original publication date of March 25, 2016.
This is not intended as legal advice; for more information, please click here.
