Debit Card Alternative to Payroll Checks
For the millions of unbanked employees in the U.S. and their employers, receiving wages via paper paychecks can be costly in time and money. Implementing a paycard system can bring your institution up to 100 percent e-payment, eliminating the messy administrative processes that come with cutting checks. This web seminar, originally broadcast on February 19, 2013, covered how paycards work, the reasons why paycard systems work for all employees, and the benefits of partnering with a paycard vendor.
Hillsborough County Public Schools is the eighth largest district in the country. We employ 28,000 people, including 2,000 substitutes and temporary workers. We were already sold on electronic payroll (direct deposit) many years ago. We were at about 92 percent direct deposit rate, but we wanted to capture that remaining population and reach 100 percent. The problem was that we were unsure how to do that.
From a labor perspective, it was costly and time ineffective to distribute paper checks throughout the 250 work sites. Many of the people in that remaining 8 percent gap were transient, frequently moving from place to place. We received many calls from these employees who would say they didn’t receive their most recent check because we did not have their new address. My staff would have to put a stop payment on a check and reissue a new one, which took up a lot of time.
There were other, more beneficial things they could have being doing for the district with that time.
Electronic payments are changing the way the world does business. Many countries have stopped issuing paper checks altogether or are quickly moving toward that scenario. The U.S. is slightly behind several other countries in realizing the benefits of universal paperless payroll. What prevents most people from signing up for direct deposit is their lack of a bank account. Paycards are a viable option for the unbanked population. Many of these employees worry about things such as privacy and having quick access to their cash, which is why they continue to live outside the traditional banking and direct deposit system.
Additionally, recent changes in the financial industry that have resulted in increased fees, making banking even less appealing. Simply put, paycards are a prepaid debit or stored value card, similar to a gift card. They allow for your payroll department to establish a direct deposit account number and bank routing number. They allow employees to be paid electronically, similar to direct deposit. Paycards do not require a bank account or a credit check. We do not report to outside agencies, which is very important for some employees.
The wages are loaded by the employer, not requiring any change in payroll for you. One pay-to-the-penny option with the paycard system is using a Visa-network card. An employee can go to any Visa-network bank and make a 100 percent withdrawal off his or her card for free. An employee can also make a transfer from the Visa card to a bank account for free, in case they are banked but still want to keep their banking information private from his or her employer.
In order to achieve employee buy-in and 100 percent direct deposit through a paycard plan, the following are key issues to address:
- Emphasize to cardholders that they will be able to have full and complete access to their wages
- Emphasize that the paycards are Federal Reserve Regulation E and FDIC insured
- There are certain fees if employees choose not to take 100 percent of their cash off the card
Hendriksen: It was great to partner up with WEX Inc., as my team and I were not aware of the federal and state regulations related to paycard distribution.
Slowik: In additional to employer benefits, employees also see positive results when switching to a paycard. Low income workers have reported that their financial situation improved as a result of electronic payment. Paycards helped them prioritize their spending, shop online, and save money. Part of the Dodd-Frank Financial Overhaul Law is the Durbin Amendment, which reduced interchange, the fee a retailer pays to the card-processing networks (Visa, Mastercard, etc.). With that reduction, banks are expected to lose $6 billion a year in revenue. This has resulted in many new bank fees, only increasing the unbanked population and making 100 percent e-payment through traditional direct deposit for an institution even less possible.
There are three primary benefits to an institution of paycard implementation:
- Reduced organizational cost and improved efficiency
- Reduced organizational environmental impact
- Providing a true benefit and reducing costs for employees
Paycards give your employees multiple ways to access their funds for free, including at a participating bank. What a paycard provides is a place for wages to live that is similar to a bank account, but without the associated fees. It also allows for the credit features of signing for purchases or using the card online. Something unique to the WEX rapid! PayCard is the free, interest-bearing savings account that does not connect to the spend account unless the cardholder chooses to move the money into their spend account. Additional benefits include cost savings for the employee and the employer. The employee can save on their check cashing fees.
The rapid! PayCard gives an employee free ways to receive their funds after every pay period. The employer does not have to pay for the service and it does not require any change to your payroll system. It is simply direct deposit. WEX Inc. advises employers to use the branded card, which has a major credit card logo, such as Visa. The advantage there is that employees can use the paid-to-the penny option anywhere in the world that the card is accepted. Unbranded cards function but do not have the paid-to-the-penny options. There may be an issue getting employee buy-in with unbranded cards. Communication to employees about the program is vital to helping employees overcome their concerns with the program. WEX Inc. can partner with you to help achieve buy-in.
The cards even allow for fun personalization, such as a meaningful graphic or family photo. This is a fun way to show off your favorite image and get employees excited about the program. WEX Inc. focuses on not only technology and card features, but complete legal compliance, complete training and enrollment support, expert communications, and superior cardholder support. We can be reached at any time for assistance. We want to be there for you to provide support during the initial implementation period and beyond.
Hendrikson: After a rigorous RFP process, we selected WEX rapid! PayCards as the way to achieve our goal of 100 percent e-payment. We discovered that certain vendors would charge a variety of fees to our employees to access their funds. WEX Inc. would not do this, so we chose them as our solution. I can tell you this project was one of the easiest of my career to implement. Over our three-phase approach, we looked for “gotchas,” but there were none. There were no hidden fees or gimmicks. Using WEX rapid! PayCard, we were able to increase our e-pay to 100 percent. We realized cost savings for our employees and the school district. I consider the greatest savings to be that of my employee’s time. We have a very high employee satisfaction rate. It has simply made all of our lives much easier here in Hillsborough.
To watch this web seminar in its entirety please go to http://www.universitybusiness.com/ws021913