3 Things You Should Consider When Selecting a Paycard Provider

This blog was written by Wade Goins, CEO & Co-Founder of Kurensē.

When it comes to payroll, speed and efficiency are key. Traditional paper payroll checks cost employers a lot of time and money, and they can open the door to fraud via stolen routing and account numbers. They are also inconvenient and slow for employees to get their pay.

Electronic payroll removes much of the headache traditional paper payroll causes. It’s much simpler to administer, and payroll is typically processed via direct deposit to the employee’s bank account. But this isn’t the complete solution: A significant number of employees don’t have a bank account. According to the FDIC, 8.4 million households are “unbanked”¹, meaning they don’t have a bank account with which they can receive direct deposit.

To retain the benefits of electronic payroll while addressing the significant number of unbanked employees, many HR service providers are deciding to offer paycards as another payroll vehicle. Paycards allow them to deposit an employee’s earnings into a debit card in the same way they would do a direct deposit, and the employee can then access their funds via the debit card, rather than through a bank.

While this seems like an obvious solution for an HR service provider, it’s important to know that there is a wide variety of paycard vendors, and their offerings can be distinctly different with varying degrees of benefits. There are 3 aspects to a paycard offering that an HR service provider should pay close attention to:

Can you reverse deposit?

Any HR service provider is familiar with the less-than-efficient process where SMB clients must communicate employee hours worked to the HR service provider so payroll can be issued. Often the hours are reported at the last minute, and often clients will neglect to inform their service provider of employee status changes. This can often result in payroll errors which require a reversal of deposit. This is achievable with direct deposit into a bank account, but many paycard vendors will not allow a reverse deposit. So the HR service provider is left to try to recoup funds by deducting from a future paycheck, something very cumbersome and only possible if the employee hasn’t been terminated.

HR service providers should inquire of any paycard vendor whether they allow reverse deposit, which will avoid significant hassle down the road.

How easy is the employee set-up process?

Issuing paycards to employees requires a lot of numerical data to be entered into the payroll system. If this is entered manually, human error is almost guaranteed, often resulting in employees not receiving their pay because the paycard was set up incorrectly. That of course is a huge headache for HR service providers, as they have to field all the unhappy employee calls that result, in addition to quickly fixing the error.

Some paycard vendors provide automated ways to set up employees with paycards, such as barcode scanning systems that allow the HR service provider to simply point and scan the card and the employee information and have it brought into the payroll system automatically. This dramatically decreases data entry errors and thus far fewer unhappy employee phone calls for the HR service provider to field

Be sure to ask your paycard vendor if they have an electronic process for setting up employees with paycards.

Do you have visibility into the status of all your paycards?

When an HR service provider issues a large amount of paycards, it can easily get very complicated keeping track of things like which cards have been activated and which ones haven’t. If the service provider is forced to call the paycard vendor every time they need to know the status of a paycard, that is of course very inefficient. And it also results in frustrated employees, because usually the issue involves an employee not getting paid on time, something that needs to be addressed urgently by the HR service provider.

Some paycard vendors provide HR service providers visibility into all their paycards via an administrative portal, and such a portal should definitely be on the list of “must haves” when evaluating paycard vendors.

Overall, offering paycards as another payment vehicle is a real plus for HR service providers and their clients. But as with anything, there’s the right way to offer it and the wrong way. The wrong way could make paycards more of a headache than before they were even offered. Conversely, the right way can bring a huge sigh of relief to HR service providers, their clients, and their employees. Do your research and be sure you do it right the first time.

Learn more about the Kurensē paycard solution on its PrismHR marketplace page.

¹ https://www.fdic.gov/householdsurvey/