Mandate Direct Deposit in South Dakota and Free Yourself

Nov 14, 2018 2:40:07 PM

We all have great appreciation for the work our employees do for our businesses.  And, we do want to pay them timely and accurately for their efforts.  There's one more step an employer can do to make life even easier - saving everyone some time, money, and gas: MANDATE direct deposit! It’s legal for payroll in South Dakota (and some other states).

According to South Dakota Codified Laws § 60-11-9 (2006):  Every employer shall pay all wages due to employees at least once each calendar month unless otherwise provided by law, or on regular agreed pay days designated in advance by the employer, in lawful money of the United States. An employer may pay wages by check, cash, or direct deposit to the employee's bank account, unless an employer and employee agree to another form of payment.

Now you’re saying:  “Yeah, right. Many of my employees don’t even have bank accounts!”  The employee says: “I don’t trust banks”, “I like the paper”, blah, blah, blah.  For those employees that are not “bankable” – as in no bank will allow them to have a checking account due to a “checkered past” (pun intended), they can almost certainly get a free savings account.  And, likely with an ATM card attached to it.

Or, you’re thinking, direct deposit is too expensive – for 30 employees, if you're doing payroll in-house vs. through an outsourced payroll service, full retail price is a little over $1,000 per year (retail pricing at a large local bank).  Divide that by say, 26 pay dates per year, and you’re at $38.46 per pay period. That’s assuming you end up paying full retail for the direct deposit service. Shop other banks, ask for a discount.  Sometimes, you can get this service for about ½ that price.  Sometimes 'free' - depends upon your relationship with your bank or credit union.

Did you know?  Employees spend the equivalent of three work days each year going to the bank (per www.directdeposit.org).  That’s just their time, what about the gas?  Don’t forget to consider the time those employees waste at your business, on their day off, waiting to pick up their paycheck, bothering working employees with idle chit chat, etc…  

It’s your business, don’t be a pushover here.  This can be done. The following story is true:  23 employees in front of me, 18 had lit cigarettes in hand - 19 of the 23 did NOT have a bank account and weren’t terribly thrilled about mandated direct deposit.  I asked them how much it cost them to have their paycheck cashed by a business. Average answer was $4, or $104 per year (26 pay periods times $4). A pack of smokes is about $4 (the cheapies anyway).  So, that’s 26 packs of free smokes per year we were giving to our employees by mandating direct deposit. Later, many of these employees confessed, they really liked direct deposit. No matter what they spent the extra money on, direct deposit saves everyone time and money.

Stop getting calls to get back in the office to sign paychecks or requests to stop payment on the check that went through the employees' laundry!  Remember, efficiency aids profitability, and profit is NOT a dirty word!

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Topics: Payroll

David Hanna

Written by David Hanna

David Hanna graduated with an undergraduate degree in Business Administration/Major in Accounting and his Masters in Business Administration from the University of South Dakota. He spent 10 years in public accounting as a CPA doing various income tax work and business valuations including related expert witness services in shareholder litigation. He spent 3 years as CEO of a hotel management company with over 350 employees. He has been the owner/managing member of Paystubz since 2007 – see more at www.paystubz.com – or call him at: 605-721-2480

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