More for Your Money

Payroll cards for workers without bank accounts can benefit both employers and employees.

QSR Magazine

July 2005

It has been estimated that as many as 50 million workers in the United States do not have access to a bank account. Many of these ìunbankedî employees work in quick-serve restaurants. ìOn average, if you look at the employee base, about 10ñ15 percent of an employerís employees are unbanked, and that comes much closer to 50 percent if youíre talking about the quick-serve restaurant industry,î says Phillip Qualls, vice president of sales for payroll card provider Money Network.

Workers who donít have bank accounts (for a variety of reasons ranging from their age to their credit history) are forced to look to check cashing services that typically charge fees of around 3ñ8 percent to cash paychecks. ìFor someone whoís not in a real high income bracket that can really eat into the amount theyíre getting paid,î says Mark Liebman, director of programs and services for the National Restaurant Association (nra).

In order to address that problem, the NRA partnered with Money Network to offer NRA members access to a program that allows them to load money onto a plastic payroll card. The system is similar to direct deposit.

Payroll cards work much like normal debit or checking cards. Most can be used at ATMs and at the point of sale at many merchants, giving employees easier access to the money they earn. But employees arenít the only ones who benefit from switching to payroll cards. Employers also save. Electronic payroll cards eliminate the need to issue paper checks, which can cost as much as $2.10 each to print, mail, and distributeónot to mention additional replacement costs for checks that are lost or stolen. Payroll cards eliminate about 90 percent of that cost, as employers pay only a one-time fee of around $1.50 for each card and about $0.15 per payment transaction. ìFor some of these fast-food guys with lots of employees all over the country, it can be a big, big savings,î says O.G. Greene, chairman and CEO of Skylight Financial, another payroll cards provider.

Jeanne Quesenberry, controller for RPM Pizza, LLC, a company that owns and operates Dominoís Pizza stores in Mississippi, Louisiana, Alabama, and Arkansas, says her company saved more than $100,000 per year since it switched to employee payroll cards two years ago. ìAnd it didnít cost anything to implement because we were able to add it on to our current direct deposit system,î she says.

Beverly Jaronitzky, corporate treasurer for MAC Pizza Managemnt, Inc., a Texas-based Dominoís franchisee, says her company switched to payroll cards after a problem with bad checks. ìSomeone was cashing fraudulent checks in our name to the tune of $27,000 all over the city of Houston,î she says.

Though the company wasnít held liable for that money, Jaronitzky says the administrative costs were substantial, as employees found themselves dealing with police and following up with the district attorneyís office. Payroll cards, which are pin-based and can be deactivated if lost or stolen, would help prevent such a situation from occurring.

Kendal Logsdon, office manager for RGT Foods, which owns 60 Taco Bells throughout Tennessee, Mississippi, Alabama, Ohio, and Kentucky, says payroll cards have also helped her company cut distribution costs and free up time that managers previously spent distributing checks. ìNow, with the click of a button, you send out a file, and youíre done,î she says.

And that can really come in handy when you consider the high turnover rates that plague quick-serve restaurants. Many states require that terminated employees receive their final pay on their last day of work, and, even in states that donít, itís often difficult to track down workers who leave the area. An electronic payroll allows for the immediate payment of terminated employees and eliminates the need to mail checks to transient workers, saving companies from paying unclaimed property back to the state. ìNow we can make sure every employee gets all the pay theyíre entitled to,î Jaronitzky says.

Originally developed more than a decade ago to meet the needs of trucking companies, whose employees were usually on the road and couldnít collect their checks on payday, payroll cards have just begun to move into other industriesólike foodserviceóin the past three years. ìThe appeal of this product is that it can seamlessly integrate into a companyís current payroll system,î says Nazam Antoo, product director for prepaid products for Visa. ìWeíre seeing triple digit growth, and loads are now in the billions of dollars.î

Employee adoption rates for the cards are also rising. Jaronitzky says of the 700ñ750 employees at MAC Pizza, as many as half opt for payroll cards rather than traditional direct deposit, and Logsdon estimates that at RGT the number is closer to 75 percent.

Payroll card experts admit, however, that not all cards are created equal. Antoo says branded cards, such as his companyís re-loadable prepaid Visa, enjoy wider acceptance at businesses and incur fewer fees than non-branded varieties. He also says the Visa card offers an added bonus for immigrant employees who wish to send money to relatives outside the country. Instead of cash or money orders, a second card can be sent anywhere in the world and often allows for more favorable exchange rates.

Greene draws attention to the two different types of payroll cards available: stored-value cards that replace a paper check and bank account cards that feature the added bonus of automated clearinghouse debit. Other features to ask about are the availability of electronic statements that can be checked from the internet and the possibility of FDIC insurance for the value of the cards.

However, there are drawbacks to be mindful of. Some workers might be leery of receiving their pay electronically. Some, especially older employees, might be intimidated by the technology involved in the process. But managers can help alleviate some of those uncertainties. ìChange is always hard, and there will always be a certain amount of resistance, but typically after the second or third pay period, we donít hear any complaints,î Qualls says.

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