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Why Isn’t Your Company Using Paycards?

Why Isn't Your Company Using Paycards?Recent trends have shown that more companies are adopting paycard programs and giving their employees a choice of receiving their net pay via a paycard as one alternative to paper paychecks. But new research shows that some companies still aren’t ready to give their employees the choice of replacing paper checks with paycards. According to a study conducted by the American Payroll Association (APA) on behalf of ADP that surveyed 863 APA members on their views on paycards, more than 67 percent of companies are still not using a paycard program. This is a large number considering the laundry list of benefits paycards can offer organizations.

So what’s the hold-up for these companies that have yet to add paycards as a payment option for their employees?

It turns out that, according to the APA research, the majority of companies that have yet to adopt paycards as one way to pay their employees cite little to no interest from employees (38 percent) and upper management’s desire to stick with the processes they know (25 percent). Both of these reasons may be attributed to a lack of understanding of the use of paycards and the benefits they offer.

For organizations that have already implemented a paycard program, 75 percent surveyed say they are either very satisfied or extremely satisfied with their paycard provider, highlighting the fact that companies that have taken the time to properly implement a paycard program are often pleased with the results. But the different concerns with paycards cited in the APA research brings the discussion back to the lack of knowledge and understanding of paycards, with 22 percent of survey respondents saying their company’s employees do not know how to use their card and 15 percent of respondents citing employee dissatisfaction with their paycard provider’s customer service.

But what is clear from the survey is that the companies that have taken the time and effort to understand their paycard program are convinced of its benefits. Approximately 73 percent of respondents say their companies are extremely likely to continue offering paycards to their employees as one way to get paid in the next 12 months, with an additional 20 percent listed as very likely. According to the survey, employers recognize the potential benefits of offering paycards to their employees, such as helping to reduce printing costs and eliminate the need to replace lost or stolen checks. However, the benefits of paycards can also be seen by employees. For organizations that employ workers without access to a bank account, paycards can prove very beneficial.

Other research has shown that there are approximately 40 million unbanked and underbanked individuals within the United States, who pay a total of $8 billion in fees each year to check cashing outlets, payday lenders and bill-pay centers.[1] This can make cashing paper paychecks a large and costly inconvenience for those employees who do not have access to a bank account in states where employers are not required by law to offer employees free access to their net pay at least once per pay period. To put this into perspective, someone without a bank account who makes $26,000 each year would pay $750 in fees just to cash their checks and pay their bills using money orders.[2]

Paycards can help reduce fees like these because a bank account is not required in order to use one. They also can help reduce company costs by substantially reducing or even virtually eliminating paper checks. Further, implementing electronic payment processes that are easily tracked can help improve a company’s compliance with employment-related payment laws.

 

 

Click here to learn more about how electronic payment options can benefit your business and your employees.

[1] M. Fellowes, M. Mabanta. “Banking on Wealth: America’s New Retail Banking Infrastructure and Its Wealth-Building Potential.” Brooking Institution. 2008.
http://www.brookings.edu/~/media/research/files/reports/2008//1/banking%20fellowes/01_banking_fellowes.pdf

[2] “2010 Report on Check Casher and Basic Banking Fees.” Massachusetts Division of Banks. 2010. http://www.mass.gov/ocabr/docs/checkcashreport2010.pdf



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