Paycard Benefits
In a perfect payroll world, all employees in an organization would have their own bank accounts and would proactively elect to receive their pay via direct deposit. However, the reality is that not every employee has a bank account or can easily open one for a variety of reasons. And, if you are an employer in the hospitality, restaurant, retail, or transportation sectors of our economy, a greater proportion of your workforce is likely to be part of the unbanked population.
Until recently, this situation presented a problem for employers that wanted to take advantage of the cost savings that can be achieved if they could just increase their use of the automated clearing house (ACH) system to initiate direct deposit transactions for their payroll disbursements.
With the increased availability of paycards, employers have a viable payment option they can use to electronically pay their unbanked workforce and achieve cost savings similar to those already realized with the use of direct deposit. In fact, both employers and their workers can share in the advantages that paycards offer.
Employer Advantages
Aside from the initial start-up costs associated with rolling out a paycard program, employers will immediately eliminate the reoccurring costs associated with buying traditional paper paycheck stock with security features. Employers will also enjoy cost savings from decreased toner cartridge usage for their paycheck printers as well as significant decreases in postage and overnight delivery charges for sending paychecks to employees at multiple work sites.
Other advantages of paycard deployment and use for employers include:
- the reduction or elimination of bank service fees and account reconciliation costs, as well as stop payment fees for lost/stolen paychecks;
- initiating final wage payments to terminating workers via a paycard in lieu of having to physically provide a final paper paycheck to them in person or via overnight delivery;
- the elimination of escheatment liability for the employer in many cases, as it will be passed on to the financial institution that actually holds the employee's funds; and
- by decreasing the total number of paper paychecks having to be produced and sent out by the organization to pay employees their wages, employers can significantly minimize their exposure to paycheck fraud
Employee Advantages
From an employee's perspective, there are also intrinsic advantages and benefits when using a paycard offered to them by their employer instead of being paid each and every pay period via a traditional paper paycheck. With a paycard:
- employees immediately eliminate check-cashing fees that they may have historically paid to access their wages each payday;
- trips to wait in line to cash paper paychecks at banks or check cashing establishments become unnecessary;
- wages can be accessed via 24-hour ATM networks;
- employees no longer are required to go to their worksite to pick up paychecks on days off or during vacations;
- no more waiting for paychecks to arrive in the mail;
- employees experience increased safety and security associated with not having to physically carry their entire pay on their person, in cash, after cashing their paycheck;
- employees can now purchase goods and services at point-of-sale terminals within stores;
- exposure to identity theft decreases as the likelihood of personal information on paychecks ending up in the wrong hands is eliminated when paychecks and pay statements are no longer issued to employees on paper;
- employees can sometimes opt to have their employer issue a secondary card to allow family members access to wages; and
- employees help decrease the remote chance of not being paid timely due to unforeseen circumstances, such as natural disasters, that can impact the delivery of paper paychecks via air and/or ground transportation.
Source: American Payroll Association/ Visa Paycard Portal 2009
