Nearly 16 million consumers in the U.S. are “unbanked,” which means no one in the household where they live has a checking or savings account, according to a recent Forbes article. Add to that, there are more than 50 million U.S. adults, according to Forbes, who are considered “underbanked” because banking services may be complex, expensive, or difficult to access for them, or a bank account may be too expensive to open.

Benefits and payroll leaders trying to accommodate the needs of these employees can experience a real challenge. One solution is a payroll card, which can provide a tremendous amount of flexibility to unbanked and underbanked employees and help employers more efficiently and securely pay them.

Bloomberg/file photo

Businesses with large employee populations, such as restaurant chains, manufacturing, staffing, transportation and utilities, healthcare and social assistance, retail trade and construction are ideally suited to a payroll card solution. Payroll cards help enable employees to receive their pay via direct deposit onto their active cards, shop and pay bills, as well as give them immediate access to their paycheck on payday.

Logan's Roadhouse, a steakhouse restaurant chain with 235 locations in 21 states and 16,000 employees, is one business that has benefited from using payroll cards to help address some payroll and compliance requirements they were encountering two years ago.

The restaurant was paying less than 40% of its employees via direct deposit. It also was printing and distributing all employee pay checks in-house. Every employee received a paper pay statement every two weeks via overnight or two-day shipping. Printing and shipping pay checks and statements to its 235 locations cost Logan’s approximately $100,000 a year. The annual expense rose to $300,000 as the company added the cost of materials, equipment cost and maintenance, labor, stop payment and reissue costs for lost or stolen checks, and any additional bank fees.

Distributing Forms W-2 to employees also was a challenge in light of the company's 150% employee turnover rate. That expense was $40,000 a year for printing and shipping.

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However, since implementing a payroll card solution, Logan’s Roadhouse has enjoyed a wage payment environment where they achieved 99.6% paperless efficiency and dramatically reduced compliance risks.

8 ways payroll cards work
If you’re considering a payroll card solution for your business, you may want to look for certain attributes that will benefit your clients and their employees:

  1. More than one ATM Network: Implementing a payroll card that’s affiliated with more than one ATM network enables employers to provide wider coverage for their employee payroll cardholders.
  2. Individual and bulk enrollment. This feature helps employers quickly and efficiently enroll employees who have elected to be paid on a payroll card, so they can pay their workforce electronically.
  3. Single and bulk card funding. This capability speeds instant funding transfers to employee payroll cards.
  4. Instant issue card stock management. This helps employers order welcome packets that include cards and required disclosures so the employer can quickly issue a payroll card to an employee without waiting for a personalized card to arrive in the mail.
  5. Support for fully paperless payroll. Some states allow employers to offer paperless pay options, but other states require employers to offer employees the option to receive their pay by paper check. Look for providers that offer fully electronic pay solutions that allow employers to offer an electronically funded paper check that employees or employers can authenticate and complete on pay day, without having to activate a payroll card.
  6. Card activation monitoring process. This process allows employers the ability to monitor card activation to help keep them compliant with wage and hour requirements.
  7. Online instant funding reversals. This feature enables employers to instantly reverse the full amount of funds transferred from a separate funding account within five days from the initial transfer. It helps to simplify the process of correcting a funding error should one occur.
  8. Custom reporting. This feature enables employers to generate reports, such as those used to verify enrollment, funding, card inventory, and to verify employees’ work locations assigned through self-enrollments.

Ultimately, a payroll card can help streamline a business’s wage payment processes by providing a way for employees who elect a payroll card to receive their pay electronically. It may also help reduce the administrative burden of checks and provide employees secure, fast, and convenient access to their net pay.

A payroll card also might be worth considering to help ease the concerns of those workers on your payroll who don’t have, don’t want or can’t get a bank account.

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Aldor Delp

Aldor Delp

Delp is division vice president and general Manager of Resource and HR Solutions at ADP, LLC.