Paperless Payroll - sourcemediaconferences.com · Paperless Payroll ATM Debit Prepaid Conference...

© 2011 Network Branded Prepaid Card Association

Paperless PayrollATM Debit Prepaid Conference

November 4, 2011

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Descriptor: Paperless payroll is a goal for nearly every finance and payrollprofessional. Our current economic climate demands greater operational efficiency in finance and payroll administration. The regulatory environment for payroll is changing rapidly, and new products and services may alter the landscape of paperless payroll. Join this panel of payroll experts representing card providers, banks and the legal industry to discover how paperless payroll can be successfully implemented at your organization and become a win-win for employers and employees.


Outline

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Speakers: • Cathy Beyda, Paul Hastings Law, Chair American Payroll Association Payroll Card Council, Leader in NBPCA's Payroll Card Action Group•Reed Luhtanen, Director, Debit Cards, Walmart•Kirsten Trusko, President, Network Branded Prepaid Card Assoc

Agenda, by perspectiveBusiness: Payroll Card Market Overview Kirsten•NBPCA and the new Payroll Card Action Group•Bretton Wood’s Payroll Card Study•Trends and growth in Payroll Cards

Legal: Challenges and opportunities Cathy•Case studies

Employer: Walmart Reed


Legal Disclaimer

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The views of the presenters should not be attributed to their respective companies or firms, or to the NBPCA.

The content of this presentation is designed to provide practical information concerning the subject matter covered and is provided with the understanding that none of the presenters are renderinglegal advice or other professional services.

This presentation is for informational purposes only and is not a substitute for legal advice or your professional judgment.

You should review applicable law in your jurisdiction and consult experienced counsel for legal advice.


• Established 2011 to focus on the opportunities and challenges of paycards• Members representing: Issuing Banks, Program Managers, Card

Associations, Processors, Attorneys, Employers• Focus is solely on Payroll Cards

About Payroll Card Action Group

The Payroll Card Action Group Mission

• Drive payroll card positive awareness and market growth• Serve as a trusted advisor by providing a fact-based voice to government,

employers, media consumer groups and consumers • Monitor, report, and drive coordinated activities on federal & state legislative,

regulatory and law enforcement initiatives in payroll cards• Set a high industry bar by creating Leading Practices, Consumer Tips,

Employer tips, education tools, etc

NBPCA’s Payroll Card Action GroupEducate. Advocate. Protect. Promote.

Accomplishments• Voice of the consumer initiative• Payroll card studies• Leading Practices in payroll cards• “Coalition Connection”


Bretton Wood 2011 Payroll Card Study(released Oct. 4, 2011)

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ANALYSIS OF NETWORK BRANDED PAY CARDS

COMPARATIVE ANALYSIS OF PAY CARDS TO OTHER PAYMENT OPTIONS©

AUGUST 15, 2011

A few of the key findings: Payroll cards are the ‘greenest’ option, replacing paper statements, costs to produce, print, and deliver pay checks, and avoiding the transportation of employees going to cash/deposit the checks. At the same time enabling consumers to gain their key account information when and how they prefer: text, phone, online

Payroll cards are growing due to:1.A growing segment of the population that eschew traditional bank accounts due to either cultural cost or qualification issues2.Costs of issuing checks by government and corporate entities3.Political and societal needs to move from a cash based economy including costs of producing and distribution coin and currency4.Loss of tax revenue due to unreported income 5.Safety and security concerns of carrying cash

© 2011 Network Branded Prepaid Card Association 6

Bretton Wood 2011 Payroll Card Study

Released Oct. 4, 2011. Chart below: Average cost across transaction forms

The following chart compares all transaction forms and computes the average cost of each option as well as displaying the average, median, high and low cost range.

Annual averages: •Payroll card $83 • General purpose reloadable prepaid card $185•Cash based lifestyle $256• Low balance checking $273.)


Payroll Today

• Robust market growth• Increase in competition; price pressure; feature pressure• Changes in regulation• Distribution channels• Innovative technology and functionality – mobile• Still relatively low awareness = great opportunity for

growth in public and private sector

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Load-On Prepaid Payroll Cards

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Source: Aite


Number of Payroll Card Users in U.S.

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Source: Aite


Changes in Industry

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Source: Citi Prepaid


Future of Payroll…

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• Competition continues to increase• Expand target market • Change in use cases –unemployment, catastrophe• Evolving distribution channels• Impact of Durbin• Fraud management and AML issues• New features and technology – mobile, load capabilities


• Convenience• No more special trips to pick up a check or time wasted to cash

paychecks• Use card for everyday purchases – groceries, gas, online purchases• Mobile banking – Account balance/transaction alerts• Online banking – View account information 24/7• Security• Peace of mind – Keep money safe until ready to use • Less risk of theft and financial loss

• Affordability• Save on service fees

• Control• Budgeting tools• Self-service options – Account info via automated phone system or

customer service

Employee Benefits of a Payroll Card


Obstacles to Implementing Paperless Pay

• Misunderstandings about payroll cards– Employees are forced to accept payroll cards against their will– Payroll cards are unregulated– Employees will incur significant fees

• Outdated wage payment statutes– Federal law plays a limited role governing method of wage

payment– Until 2003, state law did not address payroll cards– Today, 20 states have updated their statutes and/or regulations

to specifically address payroll cards

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Federal Regulation of Payroll Cards

• The Fair Labor Standards Act (FLSA)– Regulates minimum wage and overtime compensation– Unclear whether method of wage payment is regulated

• The Electronic Funds Transfer Act (EFTA) and Regulation E– Governs electronic funds transfers, including payroll cards– Requires that employees select the financial institution– Provides a number of consumer protections

• FDIC Act and General Counsel No. 8– The funds underlying a payroll card are FDIC insured

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State Law Overview

• Every state permits direct deposit, at least on a voluntary basis

• 20 states now address payroll cards in their statutes and/or regulations, or in an Attorney General’s Opinion

• Virtually every state has addressed payroll cards at least informally

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States with Payroll Card Statutes, Regulations or

Attorney General Opinions

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• Arizona (eff. 7/20/11)• Colorado• Delaware• Florida• Kansas• Maine• Maryland• Michigan• Minnesota• Nevada

• New Hampshire• New Jersey• North Dakota• Oklahoma• Oregon• Tennessee • Utah• Vermont• Virginia• West Virginia


AK

HI

OH

WA

CAVA

MI

GA

KS

IA PA

WV DE

MS

ORSD

MO

WI

MN

KY

SC

FL

NC

UT

AZ

ND

NM OKTN

NE

WY

LA

IL IN

AR

VT

NY

CO

AL

MT

ID

NV

TX

MD

ME

NJ

DC

MARI

CT

NH

█ Paperless Pay Permitted Unclear Treatment of Payroll Cards

█ Partial Paperless Pay █ Must Be Voluntary3

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State Approach to Paperless Pay(Please see appendix for list)


The Green States

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• Alabama• Arizona (eff. 7/20/2011)• Colorado• Delaware• Indiana• Kansas• Kentucky• Louisiana• Maine• Massachusetts• Michigan• Mississippi

• Missouri• Nebraska• North Carolina• North Dakota• Ohio• Oklahoma• South Carolina• South Dakota• Tennessee • Texas• Utah• Washington• Wisconsin


Common Requirements for Paperless Pay

• At least one means of accessing full wages each pay period at no cost (i.e., payment at par)

• Employee consent• Training or distribution of educational materials regarding

the program• Disclosure of potential fees• Employee ownership of funds• Compliance with state law pay stub requirements

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Case Studies: Employer # 1

• State Employer– Size: 11,000+ employees– Motivation: Printing and deliver paychecks was an

inefficient use of time and other resources– Implementation Strategy: Employees had 30 days

to enroll in direct deposit or they would be issued a payroll card

– Current Participation Rate: 99%.


Employer # 1 - Outcome

• Benefits Realized– Increased direct deposit participation– Cost savings– Financial literacy and empowerment– Certainty of wage delivery

• General Observations– Many participants have bank accounts– Employees use the cards in many different ways– Employee response was mostly positive



• Retail Employer– Size: 100,000+ employees– Location: Every state but Hawaii– Motivation: Difficulty complying with final wage

payment requirements, and a concern regarding the cost of issuing pay checks

– Implementation Strategy: Initially, employees were asked to support the employer’s initiative; now employees are enrolled during the new hire process

– Current Participation Rate: 90% direct deposit, 9% payroll cards


Employer #2: Outcome

• Benefits Realized– Significant cost savings once paper pay stubs were

eliminated– Certainty of wage delivery– No lost payrolls

• General Observations– Some banked employees prefer payroll cards– Trying to increase participation by mailing paychecks

was unsuccessful– Keys to success were education, management

participation and vendor support



• Staffing Agency– Size: 40,000 employees– Location: 300 locations in 30 states– Motivation: Cost savings, reliability of wage delivery

and environmental concerns– Implementation Strategy: Initial rollout was

unsuccessful. Employer negotiated lower fees and switched to a branded card; Program is voluntary

– Current Participation Rate: 49% direct deposit; 33% payroll cards


Employer #3: Outcome

• Benefits Realized– Tremendous cost savings – Reliability of wage delivery even during severe

weather• General Observations

– Participation rates are higher in states where severe weather conditions are common

– Banked employees use payroll cards in a number of different ways

– Employee education is crucial


• 3,804 stores

• $258.2 billion in sales

• Walmart.com

• Other formats: 1-800 Contacts; Vudu; Mail order pharmacy

U.S.

• 609 clubs• $46.7 billion in sales

International

• 4,556 stores and clubs• 53 retail banners• 15 countries• $100.1 billion in sales

Unit counts as of January 31, 2011; FYE10 Sales


“If we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see

what it’s like to save and have a better life. – Sam Walton

Total Units Worldwide: 8,969

Canada325 Units

China328 Units

United Kingdom 385 Units

Japan413 Units

India5 Units

Mexico1,730 Units

Brazil 479 Units

Argentina63 Units

Central America 549 Units

Chile 279 Units

As of January 31, 2011

US4,413 Units

© 2011 Network Branded Prepaid Card Association Walmart / Sam’s Club: Electronic Pay Program

Overview of the Payroll Function at Walmart

• Process payroll for associates in 50 states in US, and Puerto Rico

• Duties includes electronic payroll advice distribution, termination pay, W-2 administration, other

• Currently paying 1.4M associates – 92% paperless

• Pay frequency is both bi-weekly and weekly

• Associate base is in both rural and urban environments.


Historic Challenges with Pay Delivery

• Costly to produce and deliver paper checks

• Labor intensive

• Delivery disruptions

• Unbanked or under-banked associates

• Cost to associates

• Cash on-hand requirements

• Need for increased control and tracking

• Not environmentally friendly


• Expense Reduction– Payroll processing costs

– Bank service charges

– Reduction of cash in store

– Reduction in check distribution labor

– Decrease time at register for check cashing

• Increased Controls– Consistent delivery of pay

– Addresses disaster /emergency pay

– Solution for delivery of termination pay

– Resolution of escheatment opportunities

– Ability to meet individual state requirements Walmart / Sam’s Club: Electronic Pay Program

Benefits of Electronic Pay Program

Sustainability• Saves 4,500 trees

• Eliminates 13T of Waste Water

• Reduces 490,000 kg of carbon


Associate Benefits of Electronic

Pay Program

• Free Access to Cash

– Unlimited free cash access at our registers

– 1 Free ATM transaction per pay period at any

location

– Money Network checks

– Bank Teller unloads

– ACH to additional accounts transfers

– Cash over with purchase at thousands of

merchants

• Free Access to Information

– Daily text or email message providing card

balance

– Balance inquiries at POS

– Free IVR and live customer service

– IVR, text and online access for paystubs

• Free Additional Services

– No NSF or overdraft fees

– Additional fund loading

– Signature, PIN, and online

purchases

– ATM inquiries

– FDIC insured account


Q & A

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