Paying employees via paycard is a relatively new electronic method of wage payment that many employers have gradually embraced. The main reason for the growing popularity of these pre-loaded debit cards is that they fill the need for an electronic wage payment alternative to costly and inefficient paper paychecks for employees who are either unable, or hesitant, to obtain a bank account that can accept direct deposits.
The key to implementing a fully compliant paycard program is ensuring that requirements of both federal and state laws have been met before rolling the program out to employees. The tricky part, however, is in complying with the state laws, within which there is much variation.
But besides the legal compliance aspects, if you are considering launching a new paycard program at your workplace, be sure to also take into account the following five practical considerations.
1. Consider Your Turnover Rate
When choosing the type of paycard to offer to your employees (e.g., branded or nonbranded), consider the turnover rate of your workforce. If the turnover rate tends to be high, offering only one type of paycard may be inadequate.
For example, branded cards–meaning those bearing logos such as Visa, MasterCard or Discover–may be a good option for employees who are expected to have a generally long tenure, but not for temporary or seasonal employees. Because branded cards are personalized with the employee’s name, like a credit card, it can take a week or longer for an employee to receive his or her first card. And, if the card is ever damaged, stolen or lost, the initial application process must be repeated.
2. Consider Employees’ Ages
If the majority of your employees are minors (e.g., college students), implementing a paycard program at your workplace may actually be impractical. Paycard programs usually require employees to enter into a contract regarding all the terms and conditions of use, and employees who are minors cannot legally enter into contracts unless they can secure the co-signature of a parent or guardian.
3. Vendor Considerations
When choosing a paycard vendor, be wary of the following things:
Fees and Costs. Make sure the program offered by a potential vendor is cost-effective for both you and your employees and that proposed fee structures comply with applicable limits. Do not rely solely on vendor representations; proactively do your own research to verify legal limitations on fees and costs.
System Compatibility. Ensure compatibility of the potential paycard system and your existing HR/payroll system infrastructure, from both a software/hardware standpoint and a systemic/procedural standpoint. Conduct a thorough cost-benefit analysis to determine what effect adding a paycard option to your current system will have on the time and effort required to make wage payments.
Vendor Support. Determine the types and levels of service and support offered by potential vendors and get the details in writing. Search the Internet for reviews of the vendor and interview current or past clients for their satisfaction level.
4. Internal Communications
Inform managers of all internal departments about the new program. The communication method used should be based on the employer’s size and the geographical location of its managers.
Before implementing the new paycard program, provide all employees with an overview of the plan, how to enroll and who to consult with questions. Employees may be notified via printed materials or electronically.
5. Internal Training and Support
Fully train HR and/or payroll department personnel on how to run the paycard program and resolve any issues that may arise. These commonly include helping employees who have problems obtaining a paycard or accessing the pre-loaded funds, and those who have lost or damaged their card. All other managers and supervisors should be sufficiently trained to be able to answer basic employee questions about the program.