Should we process employee payments via payroll?

May 9, 2017 12:14:55 PM / by David Aronson

While this may seem like a value-add service to some, the reality is that your employees don't need this, it creates unnecessary complexity for your program, and in some cases may introduce financial liability. Though technicially possible, we advise employers do not process employee payments via payroll deduction.


Top 3 reasons you do not want to process employee minimum monthly payments:

(1) Your employees almost certainly have a bank and have likely set-up direct debit for their minimum monthly payment. Asking them to switch this adds complexity to your program and likely has a negative effect on program engagement.

(2) Loan servicers incentivize loan holders to set-up direct debit by offering a discount when they do. This is not extended to payroll deductions. Bottom line is that it is not in your employees best interest to move away from direct debit because they lose out on the discount.

(3) Each employee might have a different due date for their loan payment, and that due date might not line up with when you run payroll. This means you add even more operational complexity to account for this or, worse, employee minimum payments are delivered late and they incur penalties. Who is liable if those payments were required to be processed through payroll?

Our recomendation is to keep it simple - tell employees to continue doing exactly what they do today to make their minimum payment and focus your program on employer contributions that will get them out of debt faster.

Have other questions about student loan assistance as an employee benefit? Schedule time with our client services team today.

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Topics: Insights

David Aronson

Written by David Aronson

CEO @ Peanut Butter, Kellogg MBA, Cubs fan

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