The Demise of the Paper Check as a Useful Method of Paying Workers

close up of woman at bank teller window

By Mark Putman, General Manager of Payments, ADP

If the recent and continuing global health event has demonstrated one thing – it is 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 1 in 6 Americans), ADP fully understands the process and is committed to the ideal of a world where all workers can receive their pay electronically.

It is in a time of uncertainty that 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 COVID-19 and mail services were one of the first such systems to face disruptions in several parts of the United States.

Paper paycheck production is a complex operation and involves activities like shipping (during several steps of the process) as well as office workers physically reporting for work in office locations (to carry out essential printing and packaging). Needless to say, the world at large experienced a disruption 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 5-month delay – long enough to defeat the purpose of the stimulus check in the first place.

A paper check can face other challenges too - it passes through nearly a dozen hands before it reaches 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 or 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 25% of U.S. households are unbanked or underbanked, the scale of this problem begins to come 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 negatively impact their engagement in the digital economy where unbanked and underbanked U.S. workers can experience new efficiencies and comforts that can 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 that mandate or otherwise require employers to continue to offer paper checks. A removal of these barriers, as well as education of employers and workers, can move us closer to the future where workers' access to their hard-earned money is a safe, repeatable, reliable and touchless process.

Learn more about how paycards can offer the convenience and control of compliant, electronic pay.