By Normia Arteaga, Director Wage Payments Solutions & Marketing, ADP
Given the growing popularity of electronic payroll, many companies are evaluating the potential cost savings and flexibility that methods such as direct deposit and payroll cards might deliver to their workforce.
These electronic pay methods can reduce the cost of printing and shipping checks and help limit liabilities caused by lost or stolen checks and fraud. For payroll administrators, increasing their electronic pay adoption can also mean a huge time savings because they no longer have to chase down and reconcile lost or stolen checks.
What’s the benefit for employees? According to a Visa® and ADP® study on the ALINE Card by ADP® ¹, 93 percent of payroll card holders said one of the most valuable reasons for having a payroll card was Visa acceptance for purchases and bill payment. Additionally, 92 percent said they valued having immediate access to their pay and 90 percent said they valued the 24/7 account management ability.
With payroll cards, employees don’t need to stand in line or pay check-cashing fees. They also can be used as a financial management tool to help employees budget and save by being able to split their pay between direct deposit and their payroll card.
When you consider the annual costs incurred by employees who use paper versus electronic pay options, the savings can be rather significant. The annual average cost of a basic checking account is $273 a year vs. $256 for check cashing and money order services vs. $83 for using for a pay card.
Another reason electronic pay usage is on the rise: Millennials now represent the largest generation in the U.S. workforce and are more willing to adopt and use new and upcoming financial tools. In fact, 60 percent of Millennials with household incomes of $100,000 or more report using prepaid cards. In order to attract this demographic, employers will need to keep in mind how Millennials want to be paid and manage their finances.
If your company is weighing a payroll card program, you should consider the following:
1) Understand your overall strategy and goals. Ask how much you expect your company to save and the return on investment expected.
2) Understand the regulatory landscape. Legislation varies from state to state so evaluate the laws that apply to employees in different jurisdictions. For example, some states require that companies offer a paper check option.
3) Consult with your legal team. Prior to launch, discuss how to roll out the program, how to capture employee consent, required employee notices and timing for enrollment, and more.
4) Communicate with all employees. Educate all employees on new payroll card options along with other permissible choices.
5) Capture voluntarily written consent. Make sure employees are aware that receiving their pay on a pay card is not mandatory nor is it a condition of employment. Since it is voluntary, you’ll need to capture their written consent and ensure that they accept the Terms & Conditions of the payroll card account through card activation.
¹ Source: Visa and ADP ALINE Cardholder A&U Study, 2014
The ALINE Card by ADP® is issued by MB Financial Bank, N.A., Member FDIC, pursuant to licenses from Visa U.S.A. Inc. and MasterCard International, Inc. The ALINE Card by ADP is also issued by Central National Bank, Enid, Oklahoma, Member FDIC, pursuant to a license from Visa U.S.A. Inc. ADP is a registered ISO of MB Financial Bank, N.A. and Central National Bank, Enid, Oklahoma. The ADP logo, ADP, and ALINE Card by ADP are registered trademarks of ADP, LLC. All other marks are the property of their respective owners. Copyright © 2017 ADP, LLC. All rights reserved.