Why should an employer avoid paying an employee in cash?

Author: Ryan F. Donovan

Several things can go wrong for an employer that pays in cash. First of all, an employer or employee who keeps too much cash on hand is at risk of theft. Second, even if a loss occurs by accident, anyone who finds missing cash will have immediate and unrestricted use of it, and it is usually difficult to prove to whom found money belongs.

Another reason to avoid the practice is that when wages are paid via check or direct deposit, it can easily be established how much was tendered to the employee and whether the employee is in receipt of the funds. This fact benefits both the employee and the employer. If there is a dispute whether an employee was paid and for how much, either party should be able to prove whether payment was made or not using cancelled checks, bank statements, etc. When dealing with cash, this is not usually the case unless the employee is given a receipt and the employee signs off on receiving the proper amount.

If an employee resists direct deposit, it is best to pay him or her with a check. It should be the policy of an employer to never pay with cash. The employer is not obligated to pay in cash even if that is what the employee wants. As long as the employee is given at least several options, the employer is within its right to restrict the use of cash.