Employers are increasingly moving away from depositing paychecks into employees’ bank accounts, offering instead to add them to payroll cards.
Payroll cards work like debit cards, allowing employees to purchase goods and services or make cash withdrawals from ATMs. Unlike debit cards, though, there are no bank accounts tied to the cards and money is directly added to them by employers. In fact, employers are the only entities that can add funds to a payroll card account.
These cards offer myriad advantages to both parties, too. They are often free for employers, simple to integrate and can make payroll payments more secure. Employees no longer have to worry about losing their paychecks, either, and payroll card funds are typically insured.
Rules And Regulations
Payroll cards may function like debit cards, but they are generally considered to be prepaid cards. Despite this distinction, the rules and regulations surrounding their uses are much closer to those of debit cards than of their reloadable prepaid counterparts.
The former typically carry the same liability protections as those offered by a debit card, for example, while the latter do not offer consumers the same for unauthorized charges. Payroll card issuers are also required to disclose their fee structures and customer dispute resolution process, but reloadable card issuers are not.
What’s more, reloadable card issuers can generally change the terms and conditions of card agreements on a whim, while debit and payroll card issuers must give customers at least 21 days’ notice.
A Growing Market
As more businesses turn to payroll cards, a range of providers are entering the market and hoping to capitalize on the growing demand for employee wage solutions. That includes payment solutions company Comdata, a division of fleet cards provider FLEETCOR, which offers a payroll card program. Its Mastercard-backed cards are designed to reduce time and expenses for employers, give employees quicker access to wages and remove the fees that sometimes accompany paper check deposits.
In the same vein, financial services firm Ingo Money has announced a collaboration with payroll solutions firm ADP to help workers get faster access to their wages. The payroll cards solution aims to make Ingo’s push payments technology accessible to workers without bank accounts, enabling them to use mobile phones to cash checks and have funds quickly loaded onto to ADP-backed payroll cards. The service will also alleviate concerns about check-based payments, help the average employer save on payroll costs and offer a more attractive payment process for freelancers and gig workers.
Payments giant Visa is yet another player offering its own payroll card to eliminate the costs associated with paying employees. Its cards integrate with its direct deposit offering and can be used anywhere Visa debit cards are accepted. A payroll card program can save companies serious coin, too, according to the company, with a Fortune 500 casual dining restaurant reportedly reducing payroll costs by 65 percent and saving nearly $800,000.
With so much revenue at stake, it’s no surprise that employers are eager to find solutions that can ease payroll costs and complications. Payroll cards may not be the perfect solution, but they can ease many of the pain points that plague the payroll process — and do so for employers and employees alike.
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