What does it mean when a company stops doing DD?

[NewChief]

My wife's company has stopped doing direct deposits, instead mailing out payroll checks. I know this is some sort of sign of economic distress on the part of the company, but I'm unsure of the exact mechanics of how direct deposit with payroll works. Does it mean that their line of credit for payroll has been exhausted through the bank, and they're having to pay out with cash on hand or something?

[Buck]

I don't think thats anything to worry about.

[Demonpenz]

seems like it is happening more these days.

[Whoarethechefs]

It may be a cost cutting move on their part, payroll and DD services aren't that cheap.

On the other hand they may be hurtin bad and bouncing a check is a lot cheaper than going IF on a DD transaction.

my $.02

[wild1]

Mail float may give more time to make payroll, I suppose.

[Simply Red]

My wife's company has stopped doing direct deposits, instead mailing out payroll checks. I know this is some sort of sign of economic distress on the part of the company, but I'm unsure of the exact mechanics of how direct deposit with payroll works. Does it mean that their line of credit for payroll has been exhausted through the bank, and they're having to pay out with cash on hand or something?

that. I have almost no doubt, beware! have her mentally check out and start interviewing.

[blaise]

They might have outsourced to a different payroll company.

[Frazod]

Whatever the reason, it probably isn't good.

[CoMoChief]

It costs money to set up DD, probably just a cost cutting thing.

[Fish]

Stock up on beer, toilet paper, and Twinkies now.....

[Lumpy]

Whatever the reason, it probably isn't good.

"The Bobs" are coming!!!

http://hippiekiller.files.wordpress.com/2008/06/bobs.jpg

Seriously, it's prolly nothing. The fees associated w/ DD were possibly increased and outweigh the cost to print/mail checks.

[Rain Man]

In itself, I don't think it means anything. If they're still using the payroll service, it's actually more expensive to do manual checks, so there's no reason to switch to save money unless they've dropped the whole payroll service.

What it might mean is that they've either grown enough that they can justify having a full-time person do it (probably means at least 500 employees as a guess), or in a worse scenario that they're worried about cash flow and don't want the money taken out of their account automatically. In the latter case, it means that they might start putting payroll out on different days when they know they've got enough cash in their accounts.

The payroll service isn't all that expensive, and it's probably more expensive for them to do it themselves. If they're trying to cut the cost of a payroll service, then they're hurting.

My guess is that they're worried about big automatic deductions from their accounts, which means cash flow worries.

[talastan]

Best bet would be to have a backup plan just in case. CYA my friend. DD does cost companies money and it could be a cost cutting measure. For DD to take place you have to have some sort of cash on hand though because between their bank and your bank it is pretty much a direct cash transfer whereas Checks do take some time to clear. Of course checks also cost money in printing as well, so again just be prepared. Also just have your wife talk to her HR director and just casually ask why the switch.

[Simply Red]

I'd just directly ask them, that way she'd be able to feel them up.

[NewChief]

Well, she's asked. They said it's "a problem with the banks" which to me indicates cash flow problems. The weirdest part to me is that they're creating this whole affiliated/subsidiary company at the moment as well. This is costing them some initial money, but it also has some quick cash returns. Anyway, they (the owners) seem to be putting all of their effort into this secondary company at the moment. I'm worried that they're setting up their "main" company for bankruptcy, then they're going to run with their affiliate company. I'm not sure this will be possible, though, because the affiliate company runs out of the same warehouse as the main company and has overlapping employees.

They could also just be trying to strike where the iron is hot and get some cash on hand through the secondary company. The problem is that the main company did a TON of expansion just prior to the economic downturn. The owners (my wife is good friends with them) insist that they're going to weather the storm and come out on top, but their arguments are starting to sound hollow to me. They keep telling my wife that she's going to be well-compensated once the financial malaise is over.

The whole situation is wacked out at the moment, but we'll just hope for the best. She's already looking out for other jobs.

[HemiEd]

It costs money to set up DD, probably just a cost cutting thing.

Yeah, we made that cut over 3 years ago.

[bevischief]

They are just following what the gov't has been doing printing money they don't have... Update the resume and start looking...

[Mr. Plow]

Sounds like they are preparing to give raises to everyone.

[Great Expectations]

DD is usually much less expensive than giving out checks. There is an expense to both. Some banks might require an ACH guidance line (line of credit) to do direct deposit which is usually only activated if the company was to spend more in payroll than they had in their account thus eliminated the possibility of "bouncing" a check. If a company is in trouble it is possible that the ACH guidance line could be revoked, thus no more direct deposit.

[Bob Dole]

Actually, research has shown that direct deposit is cheaper in many cases. The Texas State Comptroller has even set up a website with a calculator. https://fmx.cpa.state.tx.us/fmx/dirdep/index.php

[ChiefJustice]

You had better start making a video to help promote your campaign for the next local school board election.


Otherwise,you are just screwed.

[Rain Man]

Well, she's asked. They said it's "a problem with the banks" which to me indicates cash flow problems. The weirdest part to me is that they're creating this whole affiliated/subsidiary company at the moment as well. This is costing them some initial money, but it also has some quick cash returns. Anyway, they (the owners) seem to be putting all of their effort into this secondary company at the moment. I'm worried that they're setting up their "main" company for bankruptcy, then they're going to run with their affiliate company. I'm not sure this will be possible, though, because the affiliate company runs out of the same warehouse as the main company and has overlapping employees.

They could also just be trying to strike where the iron is hot and get some cash on hand through the secondary company. The problem is that the main company did a TON of expansion just prior to the economic downturn. The owners (my wife is good friends with them) insist that they're going to weather the storm and come out on top, but their arguments are starting to sound hollow to me. They keep telling my wife that she's going to be well-compensated once the financial malaise is over.

The whole situation is wacked out at the moment, but we'll just hope for the best. She's already looking out for other jobs.


If they're going to start paying employees through the second company that could be another reason to stop direct deposit. It takes some time to make that transfer and it could've gotten fouled up.

[ChiTown]

My guess is that they're worried about big automatic deductions from their accounts, which means cash flow worries.

Bingo

Almost always, this is the issue for any small to med sized business, regarding direct deposits. When cash flow is a concern, checks start to get mailed (as s l o w l y as possible), instead of DD'd.

[NewChief]

If they're going to start paying employees through the second company that could be another reason to stop direct deposit. It takes some time to make that transfer and it could've gotten fouled up.

The biggest annoyance to me is that they've cut all hourly employees, stopped paying into the 401k, cut insurance contributions, and done a bunch of other cost saving measures. Meanwhile, they've hired an employee solely for this new venture. This is a company with about 50 employees, now.

[Mr. Plow]

The biggest annoyance to me is that they've cut all hourly employees, stopped paying into the 401k, cut insurance contributions, and done a bunch of other cost saving measures. Meanwhile, they've hired an employee solely for this new venture. This is a company with about 50 employees, now.


Seriously, if they are cutting that much, I would be concerned.

[soundmind]

Cutting DD is also a way to keep a closer eye on paychecks. A lot of companies are looking at this just to make sure they're not paying someone they shouldn't be because of a computer glitch...

Bill: "so you told him?"

Bob: "no, see, we fixed the glitch...."

Sounds like she is, but in all seriousness, she should be looking.

[Mr. Laz]

DD is usually much less expensive than giving out checks.this

[Garcia Bronco]

Seriously, if they are cutting that much, I would be concerned.

And to add to that...start getting the ole resume together and look.

[MahiMike]

My wife's company has stopped doing direct deposits, instead mailing out payroll checks. I know this is some sort of sign of economic distress on the part of the company, but I'm unsure of the exact mechanics of how direct deposit with payroll works. Does it mean that their line of credit for payroll has been exhausted through the bank, and they're having to pay out with cash on hand or something?

That's exactly what I'd think. Either that or their bank is going broke and the co. doesn't trust them.

[Simply Red]

at this point (since they have NOT been honest)

I'd just have her shoot up the place.

[memyselfI]

The biggest annoyance to me is that they've cut all hourly employees, stopped paying into the 401k, cut insurance contributions, and done a bunch of other cost saving measures. Meanwhile, they've hired an employee solely for this new venture. This is a company with about 50 employees, now.


Having worked in a similar situation, there are many red flags in this situation. It's good that your wife asked but it's been my experience that no one in the know is going to say a damn thing until "D-day" for two reasons.

1. If there is cause for concern with the company stability then there are layers of knowledge as to the extent, ramifications, and future response to the problems. HR might not even know the real reasons why a particular action is being done.

2. If they do know then they are not going to tell anyone unless authorized to do so because the company still has to operate through whatever is going on. The layers hunker down and don't trust anyone. Ironically, pretty soon they stop trusting each other. Gets kind of comical.

I'm not telling you this to worry you. I was in a position of being 'in the know' about layoffs, cost cutting, and downsizing and had no idea that I was going to be one of them.

[ClevelandBronco]

Rainman is probably correct, but if you're still worried, you could:

1. Cash the payroll check. Don't just deposit the check, because if there is a problem with it, it could come back to haunt you.

2. Deposit the cash.

[Simply Red]

Rainman is probably correct, but if you're still worried, you could:

1. Cash the payroll check. Don't just deposit the check, because if there is a problem with it, it could come back to haunt you.

2. Deposit the cash.

3. keel dem w/ gun!

[ThaVirus]

I'd just directly ask them, that way she'd be able to feel them up.

This.. And we'll need pics