Paycards Versus Paychecks

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There’s been a lot of controversy lately over the use of payroll cards instead of paychecks for delivering employee compensation. The practice of using paycards was implemented by employers as a convenient way to pay employees who don’t maintain a traditional bank account. With many employers now processing payroll by direct deposit via electronic funds transfer (EFT), paycards offer a convenient alternative for paying employees who can’t receive their pay via EFT.

More recently, some organizations have expanded their use of payroll cards. For example, MacDonald's has allowed individual franchise owners to decide how to pay employees. This has resulted in a much wider use of payroll cards in some areas, sometimes without even offering the option of a printed paycheck. Paycards are increasing in popularity for reasons other than the absence of traditional bank accounts. They allow an employer to use a single method of payment for everyone, simplifying payroll administration. The fees and overhead costs associated with paycards are generally lower than the cost of processing printed checks, so paycards may also reduce payroll costs for the employer. No doubt, one reason payroll cards are less costly to employers is that most card issuers also charge fees at the other end. And there’s the rub. According to Ben Jackson of Mercator Advisory Group (as cited by Forbes),

“The payroll laws vary from state to state, but the underlying principle of the laws boils down to this: Employers cannot compel workers to take their pay in a way that costs them money.”

Although fees vary from issuer to issuer, they range from $1.75 for an ATM withdrawal to a $7 fee when a card is declared inactive. In other words, with paycards employees may even face “non-user” fees. These fees have caused some employees to rebel against paycards when no other payment option was offered. The debate over payroll cards will likely persist as their use expands to a projected $62.6 billion dollars in face value by 2016[1]. Both employers and card providers will have to navigate a complex legislative environment in the face of their growing popularity.

Whether or not paycards survive as a preferred method of payment, employers will continue to look for ways to streamline payroll processes and reduce administrative costs and the payments industry will continue to offer creative solutions. Perhaps the paycheque of the future will be a direct deposit into a virtual account or mobile wallet that gives employees fee-free access to funds through smartphones, debit cards and point of sale terminals. Of course, then we'll have to ask "What happens to the employee with limited internet access, or no smart phone?"

Or maybe the solution for payroll in a non-traditional world will be something completely different. Taking a new spin on an old approach, perhaps companies will set up payroll trust accounts and issue every worker a debit card (or subcutaneous ID chip!) that provides fee-free access to their balance. With the protection of labor legislation and appropriate regulatory oversight, the shortcomings of the historical “company store” could be avoided. Such a system might offer a cost effective alternative to businesses and provide equal access to all employees. And, if this hypothetical payroll trust was fully integrated with a company’s business information systems, it might even allow employees direct access to accrued vacation pay or provide limited overdraft protection via payroll advance.

Who knows what may emerge as payroll becomes more global and more complex. What we do know is this: the payments industry will continue to evolve and big business will continue to look for ways to reduce payroll overhead. Inevitably, where these two trends intersect, innovation and experimentation will continue to happen. Interesting times indeed!

 

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Achieving Fair Pay Regardless of Gender

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Recently we shared some of our own efforts to increase the diversity of our workforce, especially with respect to gender balance. Like most software development firms, we typically receive many more resumes and inquiries from male candidates, especially for software engineers and other technical roles. Recently, we’ve had some great success sourcing qualified female candidates through a local job fair, although we’re still not sure what caused the unusual skew in that instance. In addition to being a software development company, we’re also an HR company, by virtue of the fact that we develop …

Two Approaches to Calculating Bonuses

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There are a lot of traditions surrounding the distribution of bonuses ranging from timing to eligibility, from merit to patronage, from celebration to stomach ulcers. The less pleasant traditions are usually a result of poorly defined structure or “bias bonuses” that reward people based on favoritism and politics rather than contribution. Photo by Frédéric Bisson, Flickr To ensure that bonus time creates a positive tradition in your organization, here are two vastly different approaches that strive to address common bonus time inequities. The Standard Approach The annual bonus is a common approach used by …

Creating a Path for Growth

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 Photo Credit: Nicholas A. Tonelli, Flikr Research shows that one of the most important attractors in a job search (and one of the strongest incentives for existing employees to stay with an organization), is the availability of growth opportunities. At the same time, company structures are becoming flatter, with fewer levels of management and less hierarchy. These increasingly horizontal organizational structures have resulted in more lateral movement and “cross training” to support career development aspirations. Some people find scaling the “career lattice” more satisfying than the traditional approach to climbing the corporate ladder. But there …

Forget Global: What Happens When the Workforce Goes Galactic?

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If we’ve learned one thing in HR during the past decade, it’s that change is upon us. And there is no reason to expect things to move at a slower pace going forward. Even as we grapple with the reality of an increasingly global workforce, a number of recent news items are triggering an even more fantastical train of thought—what happens when the workforce goes galactic? Mars Orbit Undocking by SpaceGuy5, Wikimedia Commons Who cares, you say? That’s so far in the future it can’t possibly impact us.   …

Soccer by Any Other Name: The Workplace and the World Cup

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World Cup 2014 by Thomas, Wikimedia Commons Whether you call it soccer, football or the beautiful game, it has unquestionably united the sentiments of millions of people around the globe. In fact, the FIFA World Cup is the biggest single-event sporting competition in the world and the most watched sporting event on the planet. So much so, that one week into the competition, advertisers had already benefited from over 1.2 billion minutes of TV and online ad viewing by a voracious global fan-base. The patriotism and passion the sport evokes is legendary. For the people of participating nations, the World Cup represents …

When an Employee Feels Underpaid

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Overworked, underpaid and under-appreciated is the current mood of many workers across the country. According to a survey conducted by employment site, Glassdoor.com, 39 percent of people do not feel they are being compensated fairly in their current jobs. Women still bear the brunt of this, with 42% of women who responded feeling they’re unfairly paid, compared to one third of the men who answered the survey. Wikimedia Commons, Public Domain The disparity between CEO’s compensation and that of front-line workers is also a constant source of tension, especially in larger corporations. According to the AFL-CIO[1], …

Get Engaged With A Globalized Workforce

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The Internet is arguably the greatest communications and technological achievement society has so far attained. If technology were to fail us, as it does in the post-apocalyptic future J. J. Abrams creates in the NBC series, Revolution, we would look back on the first two decades of the 21st-century and marvel at the incredible power each of us had at our disposal. Earth by Azcolvin429, Wikimedia Commons Thanks to the Internet, we are perpetually connected and no one is constrained by geography anymore. When it comes to sourcing staff, this creates an enormous opportunity—one we have never been …

Why HR Should Toss the Annual Compensation Review

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Wikimedia Commons, Public Domain Most of us are familiar with the annual performance review process (whether we like it or not!). In addition to annual performance reviews, some companies also implement an annual compensation review process. Sometimes the compensation review is linked to the performance review process, and sometimes it’s not. But regardless of how it’s positioned, the annual compensation review is one potentially destructive practice. What Drives Annual Compensation Reviews? When a company chooses to review compensation on an annual basis, the decision is generally driven by a Finance process rather than an HR process. …

Compensation Equity

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Arriving at fair compensation is not always easy. Aside from the fact that each position has a unique value to an organization and not all jobs are created equal, employers also face the challenge of recognizing and rewarding exemplary performance in a given role. Add to that the fact that people seldom agree on what’s fair and compensation design becomes that much more complicated. Freedom or Fairness by Nina Paley, Wikimedia Commons, Creative Commons Employees consider two things when assessing whether their own compensation is fair. How their compensation compares to their co-workers. How their compensation compares to …

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