Day Labor

• Companies who use checking accounts to compensate employees lack the ability to hire and pay most day laborers. Day laborers hire themselves out for work on a daily basis. They work for any company who needs workers that day. At the end of the day, most companies pay cash to the workers for that day. Using a checking account to compensate day laborers requires the company to maintain financial records on each individual, even if that person only works a few hours. The additional paperwork required for each laborer represents additional costs to the company to create and maintain the documents.
  
  

Expense

• Payroll checking accounts cost the company money, which can be a disadvantage. These expenses include check printing costs, labor expense or bank service fees. Check-printing costs include the cost of the paper checks and the ink. The labor expense includes the cost of employees recording employee work hours, printing and distributing the checks and reconciling the bank account. Bank service fees include monthly service charges or transfer fees. All expenses incurred by the company reduce its net income.
  
  

Risk of Theft

• A disadvantage of payroll checking accounts includes the potential liability of someone stealing the checks. When a thief obtains possession of company payroll checks, she holds the ability to cash the checks and withdraw money from the company's account. If the company discovers this theft before any checks clear the bank, the company can stop the bank from cashing the checks. If the company discovers the theft after any of the checks clear the bank, the company may be liable for the money.
  
  

Increased Management Requirement

• Payroll checking accounts typically only hold enough money to pay employee paychecks when presented. Company management needs to monitor the balance in the payroll checking account to ensure enough money remains in the account to meet payroll obligations. When the company calculates the total payroll, it transfers money into the payroll checking account from the company's main checking. A disadvantage of payroll checking accounts involves the ongoing management of the cash balance in this account.
  
  

Checking Account Alternatives

• Many companies use alternative pay methods to compensate employees. These include paying employees with cash, using direct deposit from the company's saving account or applying payroll wages to an employee's payroll debit card. Paying employees with cash reduces the company's costs for managing a separate checking account or purchasing checks. Direct depositing employee wages or applying wages to a payroll debit card using a company savings account reduces the risk of lost or stolen checks.