employer pay card guide - adp
TRANSCRIPT
Table of Contents 3 Introduction to pay cards
4 Thebenefitsofpaycardsforyouremployees
6 Thebenefitsofpaycardstoyourorganization
7 Paycardchallenges
8 Pay card best practices
9 Pay card implementation
11 Next steps
A pay card is a prepaid, reloadable card, similar toadebitcard,thatemployeewagescanbeloaded to each pay period.
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Introduction to pay cards
Payments are loaded electronically and employees need only to activate the cardtoreceivetheirwages.Accesstofundsisimmediate.
Pay cards are issued by a bank, with a license from Visa or MasterCard, and can be used for cash withdrawals at ATMs, bill payments and wherever credit and debit cards are accepted.
4
The benefits of pay cards for your employees
The 2017 FDIC National Survey of Unbanked and Underbanked Households, estimatesthatroughly8millionhouseholdsintheU.S.don'thaveabankaccount(unbanked)andanother24millionhouseholdsareunderbanked,meaningtheyhaveanaccountbutalsousefinancialproductsoutsidethebankingsystem.
Accordingtothestudy,thetopreasonsthatemployeesareunbankedincludenothavingenoughmoneytokeepinanaccount,adistrustofbanksandbankaccountfeesbeingtoohigh.
U.S.employeeswithoutbankaccountsoftenpaychargesof$5ormoretocasheachpaycheck and can also pay fees to check-cashers and bill payers. Pay cards can help employees avoid these expenses.
Prompt, reliable payment
Unlikepaychecks,paycardsareneveraffectedbypostaldelaysortheinabilitytogettoabankorcheckcashingservice.
Convenient access to funds
Forpeoplewhodon'thaveadebitorcreditcard,paycardsoffersimilarconveniences.Employeescanuse them to shop and pay bills online, withdraw money from ATMs, make purchases at point-of-sale machines,booktravelreservationsandmorewithouthavingtocarrylargeamountsofcash.Thesetransactionsmaybesubjecttoadditionalfeesthough.
Accessible to everyone
5
Choice of pay method
Personalizingcompensationandbenefitsletsemployeesknowthatyoucareabouttheirindividualneeds and preferences. Even to those who have bank accounts, choice of pay method can differentiate you from competitors.
Asmuchasyoumayliketopersonalizepay,however,somerulesapply.RegulationE states that employerscan’tmandatetheuseofpaycards.So,ifyouofferthem,you’rerequiredtoprovideanalternate form of payment. In addition, many state departments of labor have their own laws about which methods of compensation are permissible.
Financial tracking and budgeting
Somepaycardsallowemployeestotrackspendingthroughamobileapporwebsite.Theycanviewbalanceinformation,reviewchargesandevensetalow-balancealerttohelpmanagespending.Employeeswithbankaccountscanalsoelecttoputapercentageoftheirpayeachpayperiodintoabankaccount(viadirectdeposit)forsavingsandtherestontoapaycardforspending.
Offeringthechoiceofpaycardscangiveyouarecruitmentandretentionadvantageandleadtoimproved employee performance.
Security and fraud protection
TheElectronicFundTransferAct(EFTA),alsoknownasRegulationE,isafederallawthatprotectsconsumers when they transfer funds electronically. This includes pay and debit cards, automated teller machines (ATMs), and electronic withdrawals from a bank account. EFTA explains how consumers can report errors and lost or stolen cards to limit their fraud liability and recoup penalties chargedmistakenly.
AccordingtoastudyreleasedbyMorganStanleyandconductedbytheFinancialHealthNetwork,“financialwellnessprogramsreduceemployeestress,improveretentionandengagementandhelpacompanystandoutinthemarketplace.”1
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The benefits of pay cards to your organization
47% of Gen Z workers and 31% of millennials said they would turn down a job iftheycouldn'tchoosetheirmethodofpayment,accordingtoADP'sproprietaryresearch, Paycards: Generational Trends Shaping the Future of Worker Pay.
The Association for Finance Professionalsestimatesitcostsemployers$3onaverageperpapercheck,includingprintinganddistribution.Youcanreducethisbyofferingpaycardstoyouremployees.
Foramoredetailedbreakdownofhowmuchyoucansavewithapaycardprogram,useourEmployer Paycard Savings Calculator.
Increased employee engagement
Flexiblepayoptionsprovidearecruitmentandretentionadvantage.
Bynotincludingalternativestochecksandbankdirectdeposit,yourorganizationrisksmissingout on talent.
Cost savings
7
Pay card challenges
“ Youcan'tjustgiveemployeespaycardsandhopetheywillfigureeverything out on their own," saysGeorgeMavrantzas,VicePresidentofStrategyand ThoughtLeadershipatADP.“Ifanemployeemakesamistakeandgetshit withafee,theymightswitchbacktopaperchecks,evenifthepaycardwas an overall better option. ”
Fees
Sincetheintroductionofpaycards,therehasbeenmuchdiscussionaboutbestpracticesandethicaladministration,particularlyasitappliestofees.Usersmaybechargedformonthlymaintenance,ATMand point-of-sale use, replacement of lost or stolen cards, and balance statements. Fees will vary dependingupontheproviderandthestateinwhichthecardisissued.
Toprovidesomeoversight,theConsumerFinancialProtectionBureau(CFPB)createditsprepaidrule2,whichrequiresyoutodiscloseapplicablefeesandotherdetailstoemployeeswhochoosetobecompensatedbypaycards.Theguidelinefurtherstatesthatyoucan’tforceemployeestoreceivetheir pay via pay card.
Employee adoption
Ifyousetuppaycards,don'tforgetaboutemployeetraining.
Aqualitypaycardprovidershouldbeabletoassistwithyouremployeetrainingsoyoucanachievehighadoptionratesandhelpensurethatemployeesarehappywiththeirchoicetousepaycards.
Inaddition,manypaycardvendorsoffermarketingmaterialstohelpcommunicatenewpaycardplansandencourageemployeeadoption.
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Pay card best practices
Click here to learn more about how pay cards can help attract and retain today’s workers
Seek to minimize fees
Selectingapaycardcompanywithconsumer-friendlyfeescanhelpensurethatyouremployees keep the maximum amount of their pay. It may also help drive adoption of pay cards and improve employee satisfaction.
Disclose terms of uses
Providecomprehensivetermsofuseandrulesforyourpaycardprogramandallotherpaymethodchoicesthatemployeescaneasilyfindandunderstand.
Comply with jurisdictional regulations
Multi-stateemployersmustcomplywithvaryingstatelaborlaws.Makesurethatyourpaycardvendorcanhelpyoustaycompliantwithregulationsandstatelawswhereyouoperatenowormayoperate in the future.3
Ifyouofferpaycardstoyouremployees,thefollowingpracticeswillhelpyoucomplywithstateand federal laws.
Continue to offer multiple pay options
Federalregulationsprohibityoufrommakingpaycardscompulsory.Makesureyouremployeescanelect to receive their pay another way.
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Pay card implementation
Becausestatesgovernwageandhourlaws,youshouldalsobeawareof jurisdictionalrequirementsinthestatesinwhichyourbusinessoperates.Again,however, these rules are the same for all electronic pay methods.
Managing your pay card program
Ifyoudecidetoofferpaycardsasapaymentchoiceinyourorganization,youwillneedtomanagecertainaspectsin-house,includingintroducingandeducatingemployeesonthepaycardprogramyouchoose,keepingrecordsofemployeepaymentmethodselections,anddesignatingsomeonetohandleanyemployeequestionsthatarise.
Startup costs
Initialcostsforimplementingpaycardsatyourcompanyvarybyprovider,butthemaincostistypically for employee education materials and startup kits.
Implementation timeline
Mostprogramstakeonlyafewweekstobegin,butimplementationtimesvarybyprovider.
Onceyouhavechosenapaycardvendorandprogram,thevendorshouldsupplyyouwithintroductorypay card information for your employees and appropriate disclosures and opt-in paperwork.
Compliance responsibilities
Yourresponsibilityforpayrolltaxandwageandhourcomplianceisthesameaswithanyotherpayroll method.
In accordance with the Electronic Fund Transfer Act,4youcannotrequirethatemployeeshaveanaccountatacertainfinancialinstitutioninordertoreceivetheirpayoruseapaycard.
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Introducing pay cards to your employees
Youcanrolloutyournewpaycardprogramthroughyourregularchannelsofcommunication.Followingaresomebestpracticesandkeyitemstoaddress:
• Checkrequirementsinthestateswhereyouoperatetoensurecompliance.Forexample,inGeorgia,
employeesmustbenotifiedaminimumof30dayspriortoanemployerimplementingapaycard
program.
• Testthepaycardfirstwithasmallpilotgroup,suchaswiththegroupthatwillbemanaging
implementationandemployeeeducation,sotheycanprovidefirsthandknowledge.
• Haveacommunicationsplanreadypriortolaunch.Gettherightinternalstakeholdersonboardwiththe
programandannounceandpromoteitbroadlyandconsistently,incollaborationwithyourmarketing
and HR teams if possible.
• Makeadoptioneasy.Launchyourpaycardprogramatatimewhentherearen’totherhigh-priority
initiativesthatmightcompeteforattention.Provideclearandconciseenrollmentmaterialstoyour
employeesandmakesuretheyknowwhotogotoforsupportandquestions.
• Ensurecontinuedsupportforyourpaycardprogrambyincludingitinwelcomeinformationfornew-
hires and in annual open enrollment materials.
Employee training
Educatingemployeesonproperimplementationanduseoftheirpaycardswillhelpdriveadoptionandsuccessofyourpaycardprogram.Thepaycardvendoryouchoosemayhaveemployeeeducationmaterials that you can use.
Trainingshouldbeavailabletocoverthefollowingtopics:
• Gettingstarted:Optingintoreceivewagesonapaycard,settingupyouronlineaccountandmobile
app, if applicable
• Basics on how to access funds, withdraw cash, pay bills, transfer funds and check balance
• Overview of potential fees and costs
• Securityandfraudprotection
• Whotocontactforhelp,atbothyourorganizationandatthepaycardvendor
• Howtochangetoadifferentpayrolloption,ifdesired
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TolearnmoreaboutADP’spaycardprogram,Wisely™Payvisit:
adp.com/Wisely
Next steps
Whenyou'rereadytoconsiderpaycardsforyourorganization,youhavea
varietyofvendoroptions.Yourcurrentpayrollproviderisaperfectplaceto
start.Iftheydon'tofferpaycards,preparealistofrequirementstohelpyou
evaluatenewvendors.Lookforinsurance,security,compliancesupport,an
implementationplan,employeetrainingprograms,paycardmarketingand
anyothersupportneededtomeetyourgoalsandchallenges.
TheWiselyPay™prepaidcardanddebitVISAorMastercardareissuedbyFifthThirdBank,N.A.MemberFDIC,pursuanttoalicensefromMastercardInternationalorVisaU.S.A.Inc.TheWiselyPay™prepaidcardcanbeusedeverywhereDebitVISAorMastercardisaccepted.TheWisely™DirectcardisissuedbyFifthThirdBank,N.A.MemberFDIC,pursuanttoalicensefromMastercardInternational.TheWisely™DirectcardcanbeusedeverywhereDebitMastercardisaccepted.
1. BetterforEmployees,BetterforBusiness:TheCaseforEmployerstoInvestinEmployeeFinancialHealth,FinancialHealthNetwork, May 2019.
2. CFPBFinalizesChangestoPrepaidAccountsRule.
3. ThinkingAboutUsingPayrollDebitCards?ReadThisFirst,SHRM,2018.
4. FDICLaw,Regulations,RelatedActs.