Is your direct deposit or paycard campaign a little long in the tooth? Now may be the best time to update it to encompass new communications media, such as smartphone apps.
Leverage the technology for smartphone banking apps to sell direct deposit or payments via payroll debit paycards. You can go one step further and pair electronic pay with paperless deposit statements.
Caveat: Most states prohibit employers from mandating that employees receive their pay and pay statements electronically.
Paycards are still a relatively new payment medium, so your experience with them may be limited. Paycard features vary among vendors, but common features include access to ATMs and terminals at retail outlets, no-frills bank accounts and courtesy checks employees can use at the bank to cash out their net pay and online bill paying. The company can deal with one vendor, or employees can buy their own cards and present them to you.
Drawback: Most states mandate that employees can’t be charged a fee to withdraw their entire net pay in one transaction, so you’re left holding the bag. However, vendors may be willing to negotiate a fee waiver.
As long as state laws give employees the option of paper checks, there will always be a few employees who prefer them. Plus, in this age of identity theft, employees may want to revert to paper checks. Even so, you should still reach out to them, because paper checks cost the company money.
The National Automated Clearing House Association—a bankers’ association commonly called NACHA: The Electronic Payments Association—has a web site full of ideas, marketing materials and checklists you can use to reach these employees. Visit www.electronicpayments.org and click on the “Direct Deposit” tab for more information.
For new hires, a time-tested technique is to include direct deposit or paycard enrollment forms as part of their routine paperwork.
Employees won’t buy into direct deposit or paycards if repeated mistakes hinder their ability to receive their pay.
You can avoid the most common problem—employees’ pay not being properly deposited—by having them provide you with voided checks or taking their paycard account numbers directly from their cards when they enroll. Double-check that the surnames on employees’ accounts match their names as they appear in your payroll and personnel records. Remind employees to notify you if they change direct-deposit-linked banks or paycard accounts.
But other errors, known as reversals, require you to ask your bank to reverse the direct deposit or paycard transaction. Reversals can occur when an employee is terminated after the direct deposit file is sent to the bank, and state law mandates immediate payment of final pay. Reversals may also be necessary if an incorrect amount or duplicate amount was deposited.
Reversals are tricky, and here’s why:
• Reversals must be originated within five banking days of the settlement of the original (and erroneous) settlement and within 24 hours of when the error was discovered. Employees must generally be notified of a reversal.
• If employees have already withdrawn their funds, their banks don’t have to comply with reversal requests. It now becomes more cumbersome to get your money back. You might, for example, have to sue employees.
• If the mistake is an overpayment or underpayment of wages, don’t ask for a partial reversal. Partial reversals don’t comply with NACHA rules. In addition, reversals must comply with state wage-payment laws. Many states (Oregon, for example) consider a partial reversal to be an illegal deduction from wages. You must reverse the whole transaction and start again.
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