In the US, one way you can get paid is by Direct Deposit. I’ve worked for several different companies, and Direct Deposit was always predicated on the employee filling out a form with contract language. I’ve never seen such a thing with respect to getting paid by check.
Why is this? HR folks especially, is it just “the way it’s always done”, or are there Federal laws in place that make doing direct deposits based on an informal request dangerous or illegal? Are there any employers that make employees fill out a “Check Payment Authorization Form” or a “Cash Payment Authorization Form”?
To be paid by direct deposit, you have to give your employer some information they would not ordinarily have – your bank’s routing number and your own account number – and consent to their having access to your account.
I seem to recall that, when I worked in HR 15 years or so back, there was something in the authorization paperwork that would allow the employer to take money OUT of your account if a mistake were made – say, if somebody got paid $6,000 one week when they were actually due $600. I don’t recall it ever actually happening, but it was conceivable, and the idea of that made some persons nervous. I also think that, when I was a bank financial services rep and was selling the direct deposit service to businesses, it was also explicit that allowing deposits required allowing withdrawals to correct mistakes.
No cite on either of those, sorry. And I’m going by memory; it’s been a decade since I held either of those jobs.
My employer finally decreed that all new hires would only be paid through direct deposit. I’m not sure if we still have any older employees getting paychecks or not.
As Skald said, there is language in the paperwork that allows Payroll to withdraw money that is overpaid. For example LWOP paperwork that comes in late. Payroll issued you a standard 40 hour check and you actually worked 15 hours. If you have exhausted vacation/sick leave then you got overpaid significantly.
Normally they try to avoid withdrawals. Its better to take the money from the next paycheck. But if someone quit or is being terminated then withdrawing the funds is the only option.
Skald and aceplace are correct. By filling out a direct deposit authorization form, you give your employer permission to access your bank account along with your account information. Access includes both crediting your account the amount of your paychecks and debiting funds if there needs to be an adjustment.
No form is needed if you’re being paid by a live check, of course, since – technically – all an employer needs in order to write you a check is your name. (This isn’t including any of the myriad other pieces of paperwork they’re probably required to have on you.)
Not that I know of (disclaimer: I haven’t been in the industry for all that long, so I could be mistaken). My guess is, you could scribble your bank information and a few sentences on a sheet of looseleaf with your signature and it would be perfectly legitimate, if you could get your employer to accept it.
When I was selling cars after the bank job, I noticed that there was no language in the direct deposit paperwork that would allow for taking money back if there were a problem, and I knew that the bank in question (my former employer) would refuse to allow such a thing if there were no authorization on file. I thought about pointing this potential problem out to the dealership but then decided that doing so would be stupid.
That’s essentially what we did at the dealership: just provided the routing & account number. They did not have a good system there, as optimally the bank wanted to require people to wait at least one pay period before getting any directly deposited funds; this was because the first DD would be a dummy deposit, done just to make sure all the eggs were in a row.
At the last company I worked getting a ‘live’ check was an option only for newly hired personel. They were told how to set up an account with a bank or credit union.
Those people who ignored this requirement were allowed ‘live’ checks for 2 pay cycles, after which the final 3rd check was printed and held, when the person set up their automatic deposit that 3rd check was released to them. It is remarkable how fast someone can get this taken care of when they are waiting on their paycheck.
Continued ‘live’ checks were simply not an option, if you wanted to keep your job. Since the new hire was still on probation, argueing against direct deposit only, was a sure way to be shown where the nearest exit was.
Wouldn’t the same potential problem (mistaken over-payment) exist with paper checks? They don’t require you to authorize withdrawals in that case.
Sure, it’s less likely. In order to deposit a check that’s too big, you’d have to be dishonest (and stupid) or simply not paying attention, but it could happen.
Of course the same potential problem exists with paper checks. I’m sure an employment contract could be written to require the employee to submit to a withdrawal in the event of an overpayment, but the vast majority of US workers do not operate under a contract. I’ve never heard of an hourly worker who did. And absent such a contract, it would be illegal for the bank to allow an employer to access a worker’s account.
That’s a (small) part of the virtue of direct deposit to the employer. More importantly it’s cheaper for the company and less work for the payroll department. (And doesn’t require as large a payroll department.)
Yes, but if someone deposits an erroneous live check, then you’re dealing with getting the money back from a person, not a bank account. And that’s what thumbscrews are for.
You misspelled “small claims court.” Which would only be needed if the person had left the company before the error could be corrected, and probably not worth the effort anyway.
As I think on it, I can recall an instance of somebody getting overpaid during my HR/payroll tenure, but it was before direct deposit and the person was in good standing with the company. We simply paid her a fraction less for a few weeks. She was [del]lucky[/del] wise that she hadn’t blown the overpayment in a crazy Vegas weekend as some people might have, so it didn’t hurt.
And the timing makes it even less likely. My payday is Wednesday. In order for the people who receive paper checks on Wed to get them on Wed, they must be sent out from the main office no later than Tuesday, and probably Monday. The direct deposit info is probably also sent out Monday , since it’s normally in my account Tuesday.
Let’s say I took unpaid leave without pay, but the paperwork didn’t arrive until after the payroll is prepared so my pay includes two full weeks. The last chance my employer has to fix that mistake is Monday with direct deposit. If the paperwork for my leave shows up after the payroll is sent to the bank, the only way to fix it is to get the bank not to process the entire batch that includes my pay (meaning a lot of people get paid late) or to let the processing happen and then withdraw the overpayment.
On the other hand with a paper check, they can fix the mistake up until Wed. All they have to do is notify the person who actually receives the paychecks not to give me mine, there is a mistake, and a replacement check is on the way.