Paper or Plastic? The Pros and Cons of Paycards
Paper or Plastic? The Pros and Cons of Paycards

Paper or Plastic? The Pros and Cons of Paycards

Recently, paycards have been generating a lot of buzz. Paycards are an alternative method of paying employee wages—instead of payment via paper check or direct deposit, an employee’s pay is loaded onto a debit card each pay period. These cards eliminate the need for a traditional bank account, and allow companies to go completely paperless. Many employers have implemented a paycard system, but the advantages and disadvantages of paycards must be weighed before making a decision to switch.

Using a paycard system

Generally, paycard systems work in the following way:

# An employer establishes an account with a paycard program.
# The program or its partner bank issues the paycards.
# Employers deposit money into their account.
# Each employee’s wages are deducted from the employer account and are loaded onto their card every pay period.
# Employees receive a PIN and can use their card as if it were a traditional debit card.

Employer costs depend on the volume of workers using the cards and fees imposed by the bank and the program. Employees may be charged different fees depending on the program, including monthly fees, ATM fees and withdrawal fees.

Naturally, the mention of so many potential fees has raised red flags surrounding the idea of paycards. That’s why it is important to examine the pros and cons of using paper checks and direct deposit, versus implementing a paycard system.

The case for paper

* Paycards can turn out to be a costly option for employees, especially if they are not given the option of a paper check. For example, research done by the New York Times found that one provider charged $1.75 for ATM withdrawals, $2.95 for a paper statement, $6.00 to replace a lost or stolen card, and $7.00 for inactivity fees.
* Payroll laws in some states prohibit employers from compelling their workers to receive their pay in ways that cost them money, and some paycard systems do just that by collecting so many fees.
* Depending on the program, paycards may not necessarily reduce the processing costs for the business of employees.

However, despite these criticisms of paycards, paycards can be a very advantageous option for companies that partner with the right provider.

The case for plastic

* One in four families in America today is considered “unbanked.” This means they do not have access to a mainstream bank account or the financial services it provides. These families cannot receive direct deposit payments.
* By switching to paycards, unbanked employees can save up to a week’s worth of salary they would have otherwise lost to the accumulation of small fees.
* Employees can use paycards without a credit check or any bank account requirements.
* *Paycards can be cheaper than paper checks*—by up to $2.75, according the American Payroll Association.
* For most employers, paycards are easy to set up and provide the benefit of safety and convenience.
* Paycards allow companies to go paperless, even if some of their employees do not have bank accounts.

Paycards can reduce payroll costs for employers and offer a convenient choice for employees. However, it is important to research a paycard program, understand its costs and plan for its impact on your employees before you decide to implement paycards. Learn more about Paycor’s employee payment options, including secure and easy-to-use paycards.

Sources: Forbes.com, State of California, Pittsburgh Post-Gazette

More to Discover

Webinar: October Web Summit - Synergy in the Workplace

Webinar: October Web Summit - Synergy in the Workplace

Everyone has a right to dignity and respect—but we sometimes lose focus of this, even in the workplace. When employees share a common understanding of the right ways to interact with and treat one another, employee synergy and business performance increase substantially.During this webinar we’ll explore the basic pillars of workplace behavior, how to encourage them, build a culture of civility champions and spend time reaping the benefits instead of fighting a retention problem.Speaker: Jamie BiermanJamie brings 13 years of strategic HR experience in retail, manufacturing and commercial organizations. She has focused on managing leadership development, coaching & training programs, performance management and strategic planning, as...

Employee Efficiency: 12 Tips to Increase Productivity

Employee Efficiency: 12 Tips to Increase Productivity

Disengaged Workers Generate Losses, Not Profits Labor costs are the number one expense for most businesses, so it’s important to make sure you’re getting the most bang for your buck. Disengaged workers cause massive losses in productivity – between $450 and $500 billion annually.You’ve Heard it a Thousand Times: Culture Affects Productivity Businesses that want their companies to prosper should focus their efforts on employee well-being and engagement to improve efficiency. It is also just as vital to look at ways to improve the overall company culture to help make everyone more productive.Looking to enhance the efficiency of your employees? Check out these tips you can implement today: 1. Consider allowing employees to work from home...

10 Onboarding Activities to Improve the Employee Experience. Number 6 Will Surprise You!

10 Onboarding Activities to Improve the Employee Experience. Number 6 Will Surprise You!

Day 1, new hire paperwork is archaic A solid employee onboarding process sets the tone for all of your new hires, making these employees feel welcome. They shouldn’t have to wait two weeks before getting a laptop or spend the first couple of days filling out a seemingly endless stream of paperwork. If that’s their experience, chances are high that they will likely form a less than favorable opinion of the company and might not be there for the long term. On the other hand, when your onboarding program is a great experience, your new top talent can jump right into their jobs and start making an immediate impact on the business. If you think your company has room for improvement, here are ten onboarding activities that you can implement to...

Executive Summary of the BUILD Web Summit

Executive Summary of the BUILD Web Summit

BUILD a Company No One Wants to Leave More than 10,000 HR professionals registered for Paycor’s two-day BUILD Web Summit! Industry experts offered insights on how to build a company no one wants to leave. If you missed the Summit, here’s a quick overview of each session. BUILD a Compelling Benefits Package In a hypercompetitive job market, the benefits you offer can help you recruit, engage and retain talent. Our speaker, Andrea Toben, says that building the right benefits package is one of the most important things you’ll do in the life of your business. Andrea advises companies to consider these non-traditional programs. Financial BenefitsFinancial and estate planning assistance Budgeting and cash-flow tracking tools Credit monitoring...