Why Payroll Cards are a Win-Win for Employers and Employees

When looking for ways to streamline their operations or reduce expenses, small businesses often overlook the payroll function, which can be a drag on the bottom line. While many businesses are turning to payroll direct deposit as a cost-saving solution, it’s not an option for companies that employ unbanked or underbanked workers. That’s why payroll cards can be a win-win solution, providing both businesses and employees with cost and time savings.

Why Use Payroll Cards?

The payroll function cost, which includes printing checks, stuffing envelopes, and mailing them, can average approximately $4 to $5 per employee. For many businesses, a direct deposit solution can bypass those machinations. But for businesses with employees who don’t utilize the banking system, it’s not a viable option.

There are several reasons why more than 60 million workers don’t utilize the banking system. They may not want to pay banking fees, have a troubled history with banking, or simply lack trust in the banking industry. If they receive a paycheck, they need to use a check-cashing service, which is costly and time-consuming. It is also a poor way to manage their finances.

How Payroll Cards Work

Payroll cards function similarly to debit cards, enabling businesses to pay their employees as quickly and safely as a direct deposit to their bank account. The card is issued as a Visa or Mastercard, allowing it to be used anywhere and in the same ways as a debit card – at checkout counters, for bill payments, or to access cash through an ATM.  Payroll cards are issued in the employees’ names and offer the same level of security as debit cards with PIN code access. Employees who lose a payroll card can get a replacement from the issuer.

Payroll Card Advantages for Employers

On average, businesses can save more than $220 per employee by switching from paper paychecks to payroll cards. But businesses can benefit in several ways, including:

• Low startup costs
• No liabilities
• Eliminates the possibility of check fraud
• Eco-friendly
• Improves employee morale

Payroll Card Advantages for Employees

Employees whose best option is a payroll card will benefit in many ways:

• Immediate access to their earnings
• No waiting or cost to cash paycheck
• Safe and effective money management
• No concerns over losing or damaging a paper check
• No worries over having to carry cash

Are There Drawbacks to Payroll Cards?

There are no drawbacks to payroll cards from a purely functional standpoint, as both parties benefit by saving time and money. While the payroll card industry was once under scrutiny for complaints about high transaction fees, consumer agencies have applied pressure for lower fees or their elimination.

Employers have a fiduciary obligation to select a payroll card provider that charges reasonable fees and provides complete transparency in its fee structure. However, as the payroll card industry expands, employers can easily shop and compare costs and services, starting with their local bank.