If your company is like most, the majority of your employees use Direct Deposit to receive their pay. However, a few employees that resist or ignore your attempts to pay entirely by Direct Deposit can impact your hard and soft payroll costs significantly.

A recent study commissioned by the U.S. Department of the Treasury and the Federal Reserve Banks found four main reasons that the majority of non-users are reluctant to use Direct Deposit.

Emotional reasons
The people in this category like the feeling of "cash in hand and worry that using Direct Deposit would take away their control of the money.

Inertia
These people are generally not averse to switching. They just don't see a reason to do it now.

Lack of information
Some people are afraid of electronic payments because they don't fully understand how the money moves from their employers to financial institutions.

Lifestyle reasons
Some people still request checks because they don't have bank accounts.

One way to increase your employees' use of Direct Deposit is to uncover the core reasons surrounding each individual's choice. If your company is small, you can personally ask each non-user why he or she doesn't use Direct Deposit. If your company is larger, you can conduct a survey to identify what percentage of your non-users fall into each category.

When you know the answers to these questions, then you can begin an active campaign to break down the barriers to an all-electronic payroll.

Emotional
These non-users don't mind making time to go to the bank and deposit their checks because they feel like they are controlling their money through the deposit. It is important to let these non-users know that using Direct Deposit can provide far more control and timelier deposits, and help to protect their accounts better than manual deposits.

" More than 85 percent of identity theft occurs through lost or stolen financial information including payroll and benefit checks, checkbooks and credit cards.

" According to a Javelin Strategy and Research study, one-half of identity theft is committed by a friend, family member, in-home employee, neighbor or relative who collects information from private financial documents like payroll checks.

" Using Direct Deposit will greatly decrease the number of people that see your employees' personal financial information.

Make sure your employees know that they will still receive an inactive pay stub each pay period detailing their payroll, deductions and taxes.

Research shows that once employees begin to use Direct Deposit they will not switch back to paper deposits. Consider implementing a one-time incentive program for current non-users and make sure to have new hires sign up for Direct Deposit immediately.

Inertia
These non-users can be easily switched. They don't have any emotional objections to Direct Deposit. They are just busy or have not felt a compelling reason to switch from paper to Direct Deposit. These employees might be convinced to use Direct Deposit when you show them the simple, safe and smart reasons for doing so.

Simple
Make it easy to sign up at the office. Go to the employee with the forms in hand.

Safe
Money is transferred electronically which reduces the risk of account fraud and identity theft.

Smart
Their money is in their account at the opening of business on payday - hours before a manual deposit.

According to a consumer survey completed in 2006, consumers who save money using Direct Deposit save $90 more per month than those who use another method to save, such as depositing checks or cash manually.

Lack of Information
It may take the most work to convince these non-users. Many people in this category may believe that using Direct Deposit allows employers and financial institutions to "access their personal bank accounts. It will be worth it to take time to sit with them and refute any myths that your employees may have about Direct Deposit. An animated demonstration of the Direct Deposit process, that shows that employers have no access to their employees' bank accounts, is available on the "How It Works section of our web site. You can use the content to correct any misconceptions.

Lifestyle
There are many people that do not have a bank account. Talk to your financial institution or payroll service provider about payroll cards. A payroll card is funded by Direct Deposit and the card can be used much in the same way as a debit card. The employee can also withdraw cash from the card. Many companies have found that implementing a payroll card option has been very successful in raising their Direct Deposit participation rates.

There are many opportunities to break down barriers and employee resistance to Direct Deposit. Most companies find that they achieve the greatest success by first understanding what the barriers are, and then implementing campaigns targeting those barriers. There are many helpful tools and resources on www.electronicpayments.org.


Diane Freeman is the immediate past-chair of NACHA's Marketing Management Group and FedACH product manager at the Federal Reserve Bank of Atlanta.