What Are Acceptable Forms of Payment for Payroll?

Checks are the most common form of payroll payment.
Checks are the most common form of payroll payment. (Image: check in macro image by Alexey Klementiev from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Payroll is a significant expense for any company. For many small businesses, it is the single largest expense. This makes it important to put careful consideration into how it will be managed. There are a number of acceptable payment methods when it comes to managing payroll. These options balance the company's record-keeping needs with convenience for your employees. Knowing what options are available is the first step in determining which methods are best for your business.


Cash is one of the simplest forms of payment. Paying with cash is not a widespread practice, but cash is a fairly common method of payment for temporary labor, construction helpers and those who perform odd jobs, although employers may choose to pay by cash for a variety of reasons. Cash provides the ultimate convenience for employees, since there are no checks to cash. It lacks a strong method of record keeping, however, as opposed to the detailed paper trail that is created by other payment methods.


Writing checks is the primary means of commerce for most businesses. Whether it is paying bills or covering payroll, the business world runs on checks. Using checks has a number of advantages. It eliminates the need for keeping large amounts of cash on hand and provides a payment method that can be managed in a safe and secure manner. Writing checks also creates a documented paper trail that helps reconcile the company bank account on which payroll checks are drawn. Employees have the slight disadvantage of being required to cash the check so that it can be converted to currency, but this is a disadvantage that is largely accepted as standard procedure.

Direct Deposit

With direct deposit, the payment is deposited directly into the employee's bank account, rather than being issued to the employee as a payroll check. This eliminates the need for cashing a paycheck, although a trip to the bank or ATM is still required in order to gain access to currency. Direct deposit also has an added advantage for employees in that deposits typically post at midnight, many hours before other employees receive their paper paycheck on the job.

Payroll Debit Card

Some payroll processors prefer to issue debit cards rather than checks. These debit cards typically work on either the Visa or MasterCard payment gateway. The cards can be used at ATMs or retail outlets, just like a regular credit card, with the exception that purchases are deducted from your prepaid balance rather than being applied to a credit account. Issuing a card to employees one time and then reloading the value electronically each pay period allows employers to streamline their payroll while eliminating paperwork. Not all states allow payroll debit cards. Check your state's requirements before you use this method.

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