How to Implement a Paycard Program
Author: Ryan F. Donovan
Paying wages to employees via paycard is a relatively new method available to employers. Because paycards offer most of the benefits of direct deposit without the need for an employee to have a bank account, they are a good option for employees who are either hesitant to obtain a bank account that can accept direct deposits or are unable to obtain an account for financial reasons. However, there are certain steps employers should take when considering whether and how to implement a paycard program.
Step 1: Consider Employees' Ages
An employer that employs a large number of minors may find that it is not practical to implement a paycard program. Paycard programs usually require employees to enter into a contract regarding all the terms and conditions of use and employees who are minors cannot be held liable on their own contracts. A minor cannot enroll in a paycard program unless a parent or guardian agrees in writing to accept any liability the minor may incur on a paycard. Many parents may not be willing to do so, in which case the employer should consider other wage payment methods for minors in order to protect itself from being responsible for any liability of a minor employee.
Step 2: Choose Between Branded and Nonbranded Paycards
There are two types of paycards: branded and nonbranded. An employer must weigh the pros and cons of each card type.
Branded paycards bear the popular Visa, MasterCard or Discover logo and the employee's name. Branded cards work like debit cards: the employee either keys in a personal identification number (PIN) at the point of sale or simply tenders a signature. Branded paycards are best if employees prefer to be able to sign off on a transaction rather than keying in a PIN every time they use the card. However, because a PIN need not be used all the time, branded cards are much more susceptible to theft. They also take more time to replace than nonbranded cards. Thus, branded cards are generally not the best choice for employers with high turnover or careless employees.
Nonbranded paycards do not reflect an employee's signature and employees must key in a PIN number on every transaction. In addition, the computer network that verifies balance status is not always able to verify transactions. On the plus side, nonbranded cards can be replaced more quickly if lost.
If an employer's workforce is diverse in tenure and personal preferences, a single type of paycard may be inadequate and the employer may simply offer both branded and nonbranded paycards. The employer can offer branded cards for employees who are expected to have a long tenure, and nonbranded cards for temporary or otherwise short-tenured employees. However, the employees should make the final choice.
Step 3: Choose a Paycard Vendor
Employers should consider all of the following when choosing a paycard vendor:
- Fees. Before deciding on a paycard vendor, ensure that the program the vendor is offering is cost-effective for the employer and that it will not impose burdensome costs on employees. Also, ensure that the fee structure for the employer and the employees complies with any applicable state laws. The paycard vendor should know its legal obligations, but employers should be proactive by verifying on their own what the applicable laws permit.
- System Compatibility. Ensure compatibility between the paycard system and the employer's existing HR/payroll system infrastructure from both a software/hardware standpoint and a systemic/procedural standpoint. Conduct a thorough cost-benefit analysis before moving forward to determine what effect adding a paycard option will have on the amount of time and effort required to make wage payments.
- Vendor Support. Determine what kind of service and support the vendor offers and get the details in writing rather than relying on oral representations. Search the Internet for reviews of the vendor and ask to speak to clients that use the service to find out their level of satisfaction.
Step 4: Communicate the Program to Management
Once all decisions have been made, all department managers need to be apprised of the new program. The method of communicating to them will depend on the employer's size and the managers' geographical distribution.
Step 5: Train Program Administrators
Employees who will be involved in the implementation and administration of the paycard program - typically those in the HR and/or payroll departments - must be fully trained to run the program effectively and to resolve any issues that may arise. All other managers and supervisors should also receive some training in order to be able to answer basic employee questions about the program.
Step 6: Communicate the Program to Employees
Before implementing a new paycard program, an employer should provide its employees with an overview of the plan, how to enroll and who to consult with questions. Employees can be notified in print or electronically.
Step 7: Provide Ongoing Employee Support
Support any employees who have problems obtaining their funds or paycards or in using their cards at stores, and those who lose their paycards. It may be necessary to consult the paycard vendor to resolve problems. The parameters of what the vendor will and will not do to resolve problems should be spelled out in a signed agreement.