As technological advancements continue to increase with each passing day, the world is also catching up to its pace. Employers are also making use of these technological advancements by applying them to their companies in numerous ways.
One way they use technology to their convenience and advantage is by using payroll cards to pay their employees. A payroll card, which is sometimes called a Green Dot card, is used by employers to pay their employees by loading their net wages onto a prepaid card. These payroll cards work like debit cards, but you can load only the employees’ paychecks onto these prepaid cards.
A lot of employers have acquired this method to pay their employees. This preference is evident in the variety of Green Dot alternatives that are available to companies and businesses. Statistics in 2017 showed that there were 5.9 million active pay cards in the United States, and this number is expected to grow to 8.4 million users by 2022.
Prepaid Debit Cards for Payroll
As mentioned earlier, a lot of employers prefer to use this payment method. It is with good reason because using payroll cards is very beneficial. One major benefit is that it is more cost-efficient because using payroll cards streamlines an employer’s human resources and payroll systems, making it easier for employers, especially those who have employees internationally. Another benefit of using them is that it lessens the time it takes to pay the employees’ wages, the employers can fix their focus on other business matters.
Using this method is also popular among employees. One reason is that employees can instantly access their wages even without a bank account because there is no need to pay a cheque-cashing fee, and they can access their wages even if their payday lands on a non-working day. Another is that because debit cards are also accepted internationally, you can use them for different purposes, like making online purchases and fund transfers to other accounts. However, as much as it is beneficial to employers and employees, using prepaid debit cards for payroll is also risky for employers and employees. One of the risks that they might encounter with this payment option is that they are more susceptible to theft or fraud. Hackers infiltrated last 2013, a card processing company system, and that company lost nearly USD 45 million.
Another major risk with using pay cards is that employees might be charged with numerous fees for either withdrawing their wages, retrieving the card’s balance, or simply just calling customer service, resulting in an improper reduction of an employee’s net wages.
State Laws For Using Prepaid Cards
States have implemented laws regarding using payroll cards to counter the risks that using pay cards brings. Half of the states in the United States of America have implemented laws that restrict fees to employees. An example of this is a law that allows employees to have access to a free withdrawal of their wages at least once per pay period. Some states also implemented a law that allows employees a certain amount of free transactions.
The Consumer Financial Protection Bureau has prohibited employers from mandating using payroll cards. Meanwhile, the Electronic Fund Transfer Act prohibits employers from using pay cards without consent, and some states implemented a law that requires employers to offer another payment method aside from payroll cards.
Outsourced Accounting Services: How They Can Keep Your Business Stay Compliant
Given the many risks that prepaid payroll cards might bring employers, another option that they turn to is outsourcing accounting services. Outsourced accounting services provide employers with services like managing supply chains, handling invoices and order processing from the business’s clients, managing payroll, preparing the monthly management reports on key performance indicators, and business planning, among other services.
Outsourced accounting services can help your business stay compliant because, as the name states, they specialize in accounting services. You can get expert advice and get the best practices from them. Outsourced accounting services are also updated about the state and federal regulations, so you can be assured that your business stays fully compliant with the government regulations regarding employment compensation.
As an employer, it is essential to constantly be updated with the government regulations so that your business is always fully compliant with them. Still, availing of outsourced accounting services is a great investment because it allows you to focus on the important core matters of your business while ensuring that experts are doing a lot of the functions needed in your company.