Electronic Card May be The New Face of Payroll | AccountingWEB

Electronic Card May be The New Face of Payroll

A new payroll option — the payroll card — may soon be available to American workers, including the 13 percent of workers who don’t have bank accounts and who can't take advantage of the more popular direct deposit from their employers.

With the cost of preparing paper checks averaging $1.07 plus postage per check, companies and governments are trying to get away from the traditional paycheck. A recent survey showed that 83 percent of companies polled participate in voluntary direct deposit with most indicating they would make it mandatory if the law would allow it.

The City of Dallas, claiming it is exempt from the laws governing direct deposit, has 80 percent of its 13,000 workers receiving their pay via direct deposit — an increase of nearly 30 percent in 18 months.

But a new option in the payroll world may soon make its way across the country. An electronic card may prove more convenient and less expensive for both employers and employees.

"The cards offer quite a lot of benefits to employees and to the companies that employ them," says Lucy Key Price, a Houston-based consultant who was 2002 president of the American Payroll Association (APA). "There are some employees who just don't have bank accounts and don't want them, or can't get to the bank, or don't believe in them for whatever reason."

The cards also provide a way out of exorbitant check cashing charges — often 2.5 percent of the check amount — for workers without bank accounts.

"Most of the people who don't have bank accounts cash their checks at check-cashing places, neighborhood places," Price says. "And they're charged sometimes a tremendous fee."

APA conducted a survey this year that found 97 percent of businesses provide their employees the direct deposit option and 6 percent offer the payroll card. The survey found that most offer their employees incentives to "go electronic," including quicker access to their money and slowing down paper checks by mailing them to their workers’ homes.

In the case of the Dallas city government, electronic payroll is helping to do away with paper and hand transactions.

"You don't have to have staff to reconcile checks anymore," Mongaras says. "Eventually, what we'd like to do is get away from paper altogether."

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