Can I make direct deposit mandatory?

Yes! Under the Michigan Fringe Benefits Act, employers have the right to require their employees to receive funds through direct deposit or payroll debit cards and there are several reasons why employers should exercise this right.

First, your business will save money.  Not only does it eliminate the cost of check stock and shipping, it also eliminates the cost of stop payment fees on lost or stolen checks.  Some financial institutions can charge anywhere from $15 to $35 per check for these fees, which can certainly add up.

Another reason that employers may not be aware of, is that if an employee lies and claims they lost their check or never received it in order to obtain another check from you, but then takes the original check to a check cashing institution to be cashed, the employer is still responsible for those funds.  Even if you issue a stop-payment on the original check, by the time the check expires and you try to void it to retrieve your funds, the party store has already taken that check to the bank to be cashed and will be found entitled to their money.  Therefore, the employee gets paid twice and you are out the money for both checks and the stop payment fee.

With today’s technology, employees may also take a picture of their check to deposit it directly into their account and also take their physical check to a check cashing institution to be cashed.  In this case, the employee is again paid twice and you lose.

Direct deposit also eliminates the chance of possible fraud impersonation, or other criminal actions, if that check falls into the wrong individual’s hands.  The employer would then have to press charges and pay court fees to prosecute that individual with no guarantee that their funds will be returned.

UAP can help you implement your new direct deposit policy so you can put all these headaches behind you and keep more money in your pocket.  Call us if you have questions on this topic.