Categories: Payments Innovation

What Will It Take To Get Rid Of The Paper Paycheck?

“Are paper checks really the best we can do for our workers?”

Crises have a way of exposing weaknesses, vulnerabilities and outmoded systems. For Mark Putman, general manager of payments at ADP, that means paper checks. “If the recent and continuing health crisis has demonstrated one thing, it is that compensating people via paper checks is unreliable, unsafe and untenable,” he said.

The following is an excerpt from How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond), contributed by Mark Putman, general manager of payments for ADP.

The Demise Of The Paper Check As A Useful Method Of Paying Workers

If the recent and continuing health crisis has demonstrated one thing, it’s that compensating people via paper checks is unreliable, unsafe and untenable. And as the leading provider of payroll in the United States (we pay roughly one in six Americans), ADP fully understands the process — and is committed to the ideal of a world where all workers can receive their pay electronically.

In a time of crisis, people most urgently need access to their money to safeguard and provide for their loved ones and family. And not being able to provide swift access is tantamount to denying them relief. We saw the breakdown of several essential systems in the early days of the pandemic, and mail service was one of the first such systems to face disruptions in several parts of the country.

Paper paycheck production is a complex operation, involving activities like shipping (during several steps of the process) and employees physically reporting for work in office locations (to carry out essential printing and packaging). Needless to say, the world at large experienced a breakdown in both of these activities.

For example, the federal government estimated that people receiving their stimulus checks (authorized by the CARES Act) by mail might face a five-month delay — long enough to defeat the purpose of the funds in the first place.

A paper check can be fraught with other shortcomings, too — it passes through nearly a dozen hands before reaching the worker. As a society, we have learned rather painfully to be mistrustful of communal surfaces like paper money — and a paper check is another such surface. It can also be lost, stolen or otherwise misplaced. Besides, a worker actually may need to pay money to access their own compensation — if they do not have a bank account and need to use a check-cashing service to access their money — to the tune of $8 per paycheck. Considering that 25 percent of U.S. households are unbanked or underbanked, the scale of this problem comes into sharper relief.

This raises the necessary question that we need to confront right now: Are paper checks really the best we can do for our workers? Paying them via cash or check can lock them out of the digital economy, where unbanked and underbanked U.S. workers can experience new efficiencies and comforts that make their lives better.

We need to encourage all employers to promote the benefits of electronic pay. There are several zero-fee products in the market that can help both employers and employees to do just that.

There still exist certain regulatory barriers for fully electronic payment systems in many states, which mandate or otherwise require employers to continue to offer paper checks. A removal of these barriers, as well as the education of employers and workers, can move us closer to a future where workers’ access to their hard-earned money is a safe, repeatable, reliable and touchless process.

Read more executives’ insights on the COVID-19 crisis in How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond).

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New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020

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