Payroll cards are gaining acceptance and becoming more desirable for both employer and employee.
If you're unsure what a payroll card is, think of it as a rechargeable debit card and an employer has the ability to place money into it, albeit not take money out. From an employer's point of view, it's similar in ease as a direct deposit (no checks to print and sign), which of course greatly lowers the cost of processing payroll. For employees that don't want direct deposit, it's often seen as much better than a paper check because it's easier to get cash and a traditional banking relationship isn't required.
If you're a business hoping to reduce your payroll and office costs through the use of payroll cards, there are important things to know and do to ensure your transition is a smooth and well accepted by your employees change for the better.
In order to get your employees on board with the benefits, it's important to outline what it means to them in both benefits and costs. Hiding the costs or failing to disclose them can lead to frustration and a feeling of betrayal. Therefore, it's vitally important to have an open, honest, and thorough discussion.
1. Before deciding to make the change, get feedback and information from your staff. This will help prepare you for questions and concerns they may have moving forward. Having answers when you're discussing the issue is important, and you're more likely to have answers if you know what the questions are ahead of time. Remember, what's important to you isn't likely the same as what's important to your staff, and they likely don't know your priorities without a discussion anymore than you know theirs.
2. Have a strategy when you're ready to open the lines of communication
Some choices are easy for both employer and employee, and while you may know the advantages even for the employee of why a payroll card is the right choice for them, if you don't communicate it in such a way that it's easily understood, your message may get "lost in translation."
- Be open and upfront with card fees and have a plan for them to minimize or eliminate them. It's usually not critical that all fees are eliminated because they already likely face hard (actual fees) and soft (inconvenience and disruption) with paper checks now.
- Have a map already printed with ATMs, banks, and other locations that they are likely to use the payroll card. Google maps is great for this, and it demonstrates effort on your part to help educate your staff.
- Make sure your communication is a two-way road. If you're only talking and not listening, you're likely not hearing what you need to know in order to have your staff motivated to change over to a payroll card system.
3. If you have influencers within your staff, make sure they're on board first. People tend to be tribal and having more than a single person in favor of using a payroll card is important if you want to move a larger group to the idea.
4. Outline all the pros and cons of a payroll card program so staff can see each head on. If you're listing a lot of cons, you likely don't have a good program. With so many different payroll cards out there, signing up for a fee filled card makes little sense as an employer. Sure, you may not have to pay it directly, albeit you can bet you'll pay for it in other ways including lower moral, less sign ups to use a payroll card versus paper checks, and frustration by your staff with their rate of pay.
5. Don't require employees to receive pay in the form of a payroll card unless the card doesn't have fees. Even without fees, you want to make sure you're in compliance with your state labor laws if you don't offer a paper check option. Federal labor laws can change from time to time, so it's a good idea to ensure you're in compliance with federal wage and labor laws too. Some states require cards provide access to pay without cost and each state has its own rules regarding payroll cards. Again as mentioned, fees are a big problem for employees and understandably so considering the relative amount of fees to their total value in the cards. Some court cases regarding payroll cards include:
Holak v. Kmart Corp. The plaintiff Amie Holak brought a class action suit alleging:
- Employees (class members) were required to take payroll debit cards if they didn't want direct deposit.
- Kmart charged unauthorized transaction fees for the use of the payroll cards, and deducted the fees from their wages.
- All wages couldn't be withdrawn in a single transaction and they were charged fees for every ATM withdrawal after the first one in any given pay period.
The Holak v Kmart case is a California case and Kmart was able to defend it. That doesn't mean Kmart didn't spend a huge amount of money defending the class action though. Other case to consider includes Ortiz v. Randstad North America LP.
6. When meeting with staff, make sure you explain why it's good for the company as well as the staff. If you focus on only the staff, they'll wonder what hidden motivation you have. If you're upfront with why it's important to save money in administration costs and it helps the business remain competitive and provide more for employees, they'll appreciate and not wonder why you're doing it for the business.
7. Work with a payroll card provider who is a good fit for you and your staff. Again, fees are a big deal, albeit how the accounts are serviced is important too. When examining payroll card providers, ask the following:
- Is 24/7 customer care provided, and if not, what are the hours of service?
- Is there a fee for lost/stolen cards?
- Are balance inquiries free, or is there a fee? Employees shouldn't have to pay a fee just to know how much value is in the card.
- What methods are available to find out what the current value of the card is? Ideally, access should be available by going online, using text, and by calling an 800 number to the customer service line.
- Free transaction history available online
- Point of Sle, ATM, and bank access to funds.
- Automatic bill paying services that can pay monthly bills including cable, garbage, and other household bills.
8. Easy and secure deposit of payroll money into the cards. If you have to make a lot of clicks during each pay period, it can become tiresome quickly.
9. Card issuers include the usual suspects of Visa (V), MasterCard (MC), American Express (AXP) and of course many others that aren't as well known. A card issuers is easily identified by the logo on the card and can make a significant difference in how easy the card is for employees to use and take advantage of. With various levels of acceptance, one card issuer may be the right choice over others, even though other attributes are different. For example, at one time (until very recently at the time of writing), Sam's Club (WMT) didn't take Visa, and you had to use a Mastercard for shopping (there was a work-around of sorts, you could buy a gift card at Walmart using a Visa, and then use the gift card at Sam's. The reason to jump through the hoop of stopping at Walmart first includes getting points on a credit card, favorable interest rate if you carry a balance, and amount of credit available).
Robert Weinstein is a husband, dad, stock market junkie, real estate broker, and of course…Insurance agent. Interests include my family, economics, marketing, technology, real estate, finance/investing, history, and Asia.
Robert’s insurance expertise includes having the designation of Certified in Long-Term Care (CLTC) and assist in asset protection for families with members entering retirement.
Robert is also an accomplished syndicated writer whose work can be found in TheStreet, MainStreet, CNBC, Forbes, Yahoo Finance, Seeking Alpha, MSN Money, The Money Show, Stock Saints, Motley Fool, Fidelity, Minyanville, RealMoney Pro, and many national and international newspapers.