Ronald M. Gaswirth Carrie B. HoffmanStephen B. Lindsey

Welcome to Session 259

STRATEGIC AND LEGAL ASPECTS OF PAYROLL CARD

DEPLOYMENT

About the Presenters

RONALD M. GASWIRTH

rgaswirth@gardere.com

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. HOFFMANchoffman@gardere.com

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. LINDSEYslindsey@deloitte.com

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 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.

Payroll cards work just like ATM or check cards. Payroll cards can lower an organizations spend on production and distribution of paper checks.

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

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.

Payroll cards provide additional security that paper based checks cannot provide.

Deployment Strategy 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.

Payroll cards can be used to make purchases and get cash at: Over 5 million retail Point Of Sale (POS)

locations

Most any ATM

Payroll cards fall into two categories: Non-Branded (No Visa/MC Logo)

Branded (Visa/MC Logo)

Early Movers Vendors

Deployment Strategy Employer Benefits:

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: 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 Employer Watch Areas:

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: Lifestyle change Not so obvious costs High card usage Concern over security- ATM’s Access concerns

Deployment Strategy Payroll cards work in the same manner as a

standard direct deposit. The payroll card account can be funded multiple ways: ACH (Direct deposit) File/Wire Transfer

Employer Costs 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 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.

Today One Time TomorrowAnnual number of Check/Stub printed & distributed bi-weekly 286,000 Pay statements printed for direct deposit employee population (40% DD rate) 114,400

Pay checks and statements printed and distributed to non-direct deposit employee population 171,600 8,580 Average Cost per Check/Stub $2.64 $2.64

Annual Cost of Check/Stub Process $453,024 $22,651Employer Variable Costs:

Change management, training & communications xxInitial card purchase for employees xx

Year 1 pay card load fee xxLegal support xx

Pay Card batch transfer fee xxTOTAL 453,024$ -$ $22,651

ONGOING SAVINGS 430,373$

Example- Bi-weekly payroll with approx. 11,000 employees, a $2 per pay check/stub cost and a direct deposit rate of 40%

Legal Aspects of Payroll Card Implementation State Pay Day Laws

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

Legal Aspects of Payroll Card Implementation Need understanding of legal aspects

when designing paycard program 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 Kentucky :

Statute requires “payment in legal tender of the United States or checks on banks convertible into cash on demand at full face value”

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 Nevada:

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

Legal Aspects of Payroll Card Implementation

New Mexico: 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

Fair Labor Standards Act (federal law) 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

Legal Aspects of Payroll Card Implementation

Strategic and Legal Aspects of Payroll Card Deployment

Payroll Card Adoption Considerations: Business case development Integration with current payroll platform and processes Payroll card vendor search and selection Plan design attributes

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

For more information on this topic

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Session 259STRATEGIC AND LEGAL ASPECTS OF

PAYROLL CARD DEPLOYMENT

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