The Payroll Book

CHAPTER 11Paying Your Employee

METHOD OF PAYMENT

There are basically four methods of paying your employees, and we will discuss the pros and cons of each.

Cash

Cash is a legal way to pay employees in all states.

When you pay cash there are some distinct problems. You have to obtain and keep it safe on the premises to be able to pay it out. If you have an amount of cash on hand at a known time and known place, this is an invitation to get robbed. Also, cash mislaid is cash lost. Remember the scene in It's a Wonderful Life when the uncle put the cash into a folded newspaper, forgot it, and it was found by the greedy banker, who kept it? It was gone! The records for cash payments are the individual signatures and must be kept safe for a number of years. If you make a mistake and overcount out cash to someone, you won't be able to prove it and get the overpayment back. Your employees are then subject to carrying a large amount of cash that can be lost or stolen.

Advantages include no banking or check charges, no reconciliation of each payment except in relation to the cash held for payroll and paid out, and reduced banking costs.

Check

Some states require that if you use checks they have to be drawn on a financial institution in the state where the employees work. Some require that it be located conveniently for the employees. The employees must be able to cash their checks for full face value without a charge from the financial institution on which they are drawn.

Advantages ...