Before launching a paycard program within your organization, there are a number of considerations that need to be addressed, including which paycard vendor you will use, the type of paycard that you will roll out to your employees, and how to set up the banking relationship necessary to guarantee consistent and timely access to wages. Below are some tips that will help you begin to organize your thoughts about how to address these and other issues on your way to developing a successful paycard program.
As a payroll professional, it is likely that you have developed professional and personal relationships with individuals working for your current payroll service provider. Some of these companies may have their own paycard program offering that can be incorporated into the existing services that you are currently using. Service providers can be an excellent starting point to explore the direction that you may want to go in concerning your future paycard program.
However, you should also explore other paycard program offerings in this expanding marketplace. For example, your company's funds management department may have a long-standing relationship with one or more financial institutions. Many financial institutions also offer paycard programs. If you already have sizable deposits in a bank holding your organization's payroll and other accounts, your bank's paycard program start-up and maintenance fees could be quite competitive.
In addition, there are very reputable third-party vendors in the marketplace whose core business is the development, deployment, and servicing of paycard programs for various types of organizations. And these paycard vendors often partner with various financial institutions and payroll service providers with which you may already have an ongoing relationship.
So, keep an open mind and explore all of your options so that you can choose a paycard program that meets the needs of your employer and its workforce.
Once you have chosen a paycard program vendor, one of the first decisions that you will need to make is what type of paycard you will issue your employees. Today, there are two common types of cards that an employer can choose from. They are branded paycards and unbranded paycards.
Branded paycards are essentially debit cards that display a Visa or similar logo on them. They are also frequently called "signature based" because employees have the option of signing for goods and services that they purchase with the cards in addition to using them with a Personal Identification Number (PIN). These types of cards provide the most utility for the cardholder.
Unbranded paycards, also called "PIN-based" cards, are debit cards that function only at ATMs or point-of-sale terminals through the use of Personal Identification Numbers (PINs) when the user wishes to withdraw cash and/or purchase products and services. Although these cards do not display a Visa or similar logo, they are linked to the Star, Pulse, NYCE, Cirrus, and/or Plus point-of-sale debit networks.
Both types of paycards can be issued with or without the employee's name embossed on them. Paycards issued without an employee's name are commonly called "instant issue" cards and can be quickly assigned to a specific employee for immediate use. Best practice programs provide instant issue branded payroll cards to their employees on the date of hire. This enables the employee to receive their first paycheck on the payroll card.
When launching a paycard program for your unbanked workers, you will have to decide how your employer will structure the bank account(s) for the program. Some employers may choose to have their employees' debit cards set up so there is a one-employee-to-one-account relationship. Others may opt for an aggregate or master bank account with sub-accounts established for each employee that are systemically accounted for individually, even though wages of all employees are essentially commingled. You should consult with your payroll card program provider on the options that they have available.
From an employer's perspective, the use of an aggregate/master account for a paycard program will likely cut down on administrative costs as all wages paid to employees using the cards will be sent via one ACH transaction as opposed to multiple transactions with a potential transactional fee associated to each account for each pay period.
Once you have engaged your program partner(s), the next step is to establish the responsibilities, roles, and rules associated with your program for all parties involved. At this stage of implementing your paycard program, you and your partner(s) need to answer all of the following questions:
Once you have determined each party's roles and responsibilities, they then should be formally outlined in a service contract and/or service level agreement. This step will help solidify your program's success. And, by formally establishing such an agreement, it will then create a framework to compose the actual paycard enrollment document that you will have your employees review and sign to participate in your program.
When an employee elects to participate in a paycard program, the enrollment document that they review and sign will serve as an affirmative confirmation that they understand everyone's roles and responsibilities associated with the paycard program. This is an important part of the enrollment process, as the document will validate that they read and understand that there may be potential ATM and/or POS fees that may be assessed when using their card. And, it will notify employees how to specifically address any unforeseen problems that may arise concerning their use of the card.
Source: American Payroll Association/ Visa Paycard Portal 2009
