Transcript Strategic and Legal Aspects of Payroll Card Deployment

Welcome to Session 259
STRATEGIC AND LEGAL
ASPECTS OF PAYROLL CARD
DEPLOYMENT
Ronald M. Gaswirth
Carrie B. Hoffman
Stephen B. Lindsey
About the Presenters
RONALD M. GASWIRTH
[email protected]
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Partner Gardere Wynne Sewell LLP
Served as Regional Solicitor for the Department of Labor
Practice Group Leader and Founder of Gardere’s Labor &
Employment Section
Handles all types of employment law cases, including
individual and class action discrimination; Department of
Labor matters (OSHA, Wage and Hour, OFCCP)
Assists nationwide clients in implementation of paycards
About the Presenters
CARRIE B. HOFFMAN
[email protected]
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Partner Gardere Wynne Sewell LLP
Handles all types of employment discrimination cases
Assists clients in government investigations (EEOC, DOL)
Counsels clients on employment matters
Assists nationwide clients on implementation of paycards
About the Presenters
STEPHEN B. LINDSEY
[email protected]
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Manager Deloitte Consulting
Focus area in HR strategy, operations & service delivery
Assists clients with business case development,
implementation and overall integration of technology to
deliver HR information
Lead change management, communication and training
related to HR service delivery, ERP implementation and
organizational change
Assists clients on implementation of paycards
Deployment Strategy
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Companies can deliver pay to employees through
various methods. The lowest cost method is direct
deposit. The highest cost method is a paper
paycheck. In between are payroll cards.
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Payroll cards work just like ATM or check cards.
Payroll cards can lower an organizations spend on
production and distribution of paper checks.
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If implemented with other technologies such as
employee self-service, payroll cards can be part of
an overall paperless strategy to eliminate paper
based employee processes.
Deployment Strategy
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Payroll cards have been targeted at companies with
a high un-banked workforce. Employees in these
companies can typically pay a 5-10% fee to cash
their pay checks.
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Payroll cards provide additional security that paper
based checks cannot provide.
Deployment Strategy
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Payroll cards function like PIN based debit cards, check
cards or ATM cards. They can be used at PIN based point of
sale (POS) locations for purchases, at ATM’s for cash
withdrawals or in other capacities.
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Payroll cards can be used to make
purchases and get cash at:
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Over 5 million retail Point Of Sale (POS)
locations
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Most any ATM
Payroll cards fall into two categories:
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Non-Branded (No Visa/MC Logo)
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Branded (Visa/MC Logo)
Early Movers
Vendors
Deployment Strategy
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Employer Benefits:
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Reduce/eliminate check processing and distribution
Reduce/eliminate postage fee
Reduce/eliminate off cycle checks
Simplify corrections & stop payments
Near-instant termination pay/corrections
Reduce/eliminate lost, stolen or spoiled checks
Employee Benefits:
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Reduce/eliminate the need to go to a bank for check cashing
Eliminate check cashing costs
Reduce the amount of cash carried (can’t cash half a check)
Introduction to the benefits of banking/account ownership
Additional card features (phone card, money transfer capability)
Timely card replacement
Nationwide access
Deployment Strategy
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Employer Watch Areas:
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Accurate business case development
Fielding a dedicated project team
Understanding plan design implications
Integration into current payroll processes
Commitment to proactive change management and
communications
Legal due diligence
Employee Watch Areas:
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Lifestyle change
Not so obvious costs
High card usage
Concern over security- ATM’s
Access concerns
Deployment Strategy
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Payroll cards work in the same manner as a
standard direct deposit. The payroll card account
can be funded multiple ways:
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Employer Costs
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ACH (Direct deposit)
File/Wire Transfer
The program can be free to the employer
ACH transaction costs ($.05 to $.20 per transaction)
Card load fee ($0 to $.50 per transaction)
Wire transfer fee $15 to $25 per transfer
Employee Costs
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Free initial transaction every pay period
POS fee $.75
ATM fee $1.25-$1.50
Moving a significant portion of the employee population from live
checks to direct deposit or a payroll card could deliver cost savings to
both the company and its employees.
Example- Bi-weekly payroll with approx. 11,000 employees, a $2 per pay check/stub cost and a
direct deposit rate of 40%
Annual number of Check/Stub printed & distributed bi-weekly
Pay statements printed for direct deposit employee population
(40% DD rate)
Pay checks and statements printed and distributed to non-direct
deposit employee population
Average Cost per Check/Stub
Annual Cost of Check/Stub Process
Employer Variable Costs:
Change management, training & communications
Initial card purchase for employees
Year 1 pay card load fee
Legal support
Pay Card batch transfer fee
TOTAL $
ONGOING SAVINGS
$
Today
286,000
One Time
Tomorrow
114,400
171,600
$2.64
$453,024
8,580
$2.64
$22,651
xx
xx
xx
453,024 $
430,373
-
xx
xx
$22,651
Legal Aspects of Payroll Card
Implementation
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State Pay Day Laws
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Almost every state has own wage
payment law and own agency to enforce
law
Most laws outdated
Many are being updated
 Agencies enforce according to own agenda
 Need lawyers who know the traps
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Legal Aspects of Payroll Card
Implementation
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Need understanding of legal aspects
when designing paycard program
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E-card: mandatory direct deposit
Stored value card: trust account
Form of available blank checks
Decide whether participation will be
mandatory
Consider direct deposit mandate
Legal Aspects of Payroll Card
Implementation
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Kentucky :
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Statute requires “payment in legal tender of
the United States or checks on banks
convertible into cash on demand at full face
value”
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Statute silent as to paycards and direct
deposit
Kentucky DOL’s “policy” permits mandatory
direct deposit
Even without DOL position – paycard with
blank check
Legal Aspects of Payroll Card
Implementation
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Nevada:
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Prior statute: silent regarding paycards
Amended the Administrative Code
August 25, 2004:
Permits paycards
 Restrictions
 Immediate payment in full
 One free transaction per pay period
 Optional at Employee’s election
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Legal Aspects of Payroll Card
Implementation
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New Mexico:
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Pay wages “in lawful money of U.S. or in
checks, payroll vouchers or drafts on
banks, convertible into cash on demand at
full face value” or by direct deposit if
voluntary
Nothing prohibits pay cards
Stored value format
 Blank check option
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Legal Aspects of Payroll Card
Implementation
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Fair Labor Standards Act (federal law)
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Requires payment in “cash or negotiable
instrument payable at par”
Paycards technically violate FLSA
DOL does not pursue complaints about
payment by paycard
DOL’s own position approving direct
deposit is inconsistent with letter of law
Strategic and Legal Aspects of
Payroll Card Deployment
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Payroll Card Adoption Considerations:
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Business case development
Integration with current payroll platform and processes
Payroll card vendor search and selection
Plan design attributes
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Look at the states in which you operate
Choose format for best coverage
Opinion letter requests/ Lobbying efforts
Implementation/ Change management
Employee communication and training
Handling state agency complaints
Feedback and process improvement
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STRATEGIC AND LEGAL ASPECTS OF
PAYROLL CARD DEPLOYMENT
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