4 Types of Pay Methods Businesses Routinely Use to Compensate Their Employees

4 Types of Pay Methods Businesses Routinely Use to Compensate Their Employees

Did you know the IRS has issued over $4.5 billion in penalties for incorrect payroll taxes, in just a single year? If you are like most business owners, you want to avoid getting hit with any major fees, which is why it's essential to know the types of pay methods that work for your business.

Not sure where to start? Here we cover 4 of the most popular business payment options. Read on to learn which is the right fit for your business.


In many cases, employers will choose to pay their employees in cash as a fast and simple way to get the job done. This is particularly the case for businesses that deal with heavy cash flows or one time jobs such as plumbers or repairmen.

While this can be an easy and efficient way to pay your employees, it's important to take immaculate notes to avoid any problems when it comes to tax season. Finding a good paystub generator online is a great way to keep receipts of each payment transaction.


If you are paying your employees the same amount months after months and on the same day, you may choose to go with a check. Often banks won't charge an additional fee to have checks mailed out.

Challenges you may face, however, is what happens in the event of a stolen check, lost check, or check that is cashed late.

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Direct Deposit

Direct deposit is an easy wiring method that both employers and employees seem to love. The transaction is made from one bank to another and typically takes 1-3 business days to clear.

If you choose to use this method it's important to request any necessary information like routing numbers from your employees when they are first brought on board.

Electronic Payment Gateways

Electronic payment gateways are similar to direct deposit, however, the transfer is made to a third party online rather than directly to a bank.

Depending on the payment gateway, some of these transfers can come through automatically, others can take up to 5-7 business days to clear. Most payment gateways also take a small percentage of the amount transferred.

Payroll Cards

Payroll cards are rechargeable cards given to your employees where they can automatically receive your payment each month. These cards are convenient, fast, and typically come with a back end system that makes it simple for employers to keep records of each payment.

However, it's important to remember that lost or stolen cards

may still be a challenge.

Know the Laws on the Types of Pay

The most important factor in the type of pay you choose to utilize is the laws surrounding your state and industry. Each state holds it's own business laws on how much, how often and through which methods employees may be paid.

Checking these laws ahead of time is essential to avoid any legal or tax problems in the future.

The Right Decisions for Your Business

Choosing from the various types of pay options is just one of the many important decisions you'll make as a business owner. No matter what choice you're facing, it helps to be well informed to better protect your business as it grows.

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For more insightful information to enhance your business functioning, we suggest checking out our blog on taking your business global.

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