Yet even though the EFTA permits mandatory direct deposit, your state may not. Each state may have different laws in effect that could affect your ability to require direct deposit. Paper checks are losing ground to direct deposit because of the benefits the automated transfers offer. But before you instruct employees they have to make the switch, be sure you know if mandatory direct deposit is legal in your state to avoid the risk of penalties.
Review your state laws for details or contact our compliance team, who can advise you on the legality of mandatory direct deposit for peace of mind. Read our resource on emerging pay options to learn more. Enter your email address to subscribe to this blog and receive notifications of new posts by email. Solutions Payroll Payroll tax filing, automated and integrated processing, paperless reporting and more. Talent Management Personalized recruiting, onboarding, performance management, training and offboarding.
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Industries Get an experienced partner with the insider info you need to stay compliant and ahead of the curve. Our Partners Close relationships with top-tier companies within their industries. Pricing Resources Blog Smart articles and lots of answers to your most asked questions. Read on to find out. The Electronic Fund Transfer Act EFTA , also known as federal Regulation E, permits employers to make direct deposit mandatory, as long as the employee is able to choose the bank that his or her wages will be deposited into.
Alternatively, employers can choose the bank that employees must use for direct deposit. But in that case, the employer must also provide employees another means of payment, such as cash or paper check. In some states, an employer can make direct deposit mandatory, provided certain stipulations are met. For instance, employers in Kansas, Indiana, Texas, Missouri and South Carolina can require employees to accept direct deposit, but the employer must provide another payroll payment method — such as payroll card , cash or check — to employees who do not have a bank account.
In many states — including California, New York, New Jersey, Florida, Vermont and Illinois — employers must obtain written permission from employees in order to pay them by direct deposit. In some states that allow employers to require direct deposit, the rules are very specific.
Yet even though the EFTA permits mandatory direct deposit, your state may not. Each state may have different laws in effect that could affect your ability to require direct deposit. However, the state guide on pay and record keeping says that employers may require direct deposit. However, you can pay your employees this way if they request it. Maine: Employers in Maine can require direct deposit.
Workers simply have to be able to make an initial withdrawal of the entire net pay without incurring additional costs. And there cannot be a charge to those employees who opt to be paid by direct deposit. Rhode Island: Mandated direct deposit is not allowed. It is only permitted if an employee requests this method of payment in writing.
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