Editor’s note: Prepaid payroll cards are emerging as an alternative to paychecks or direct deposit for compensating employees. These cards act a lot like a credit or debit card, but with less expense or personal bank accounts involved. We’ve just completed a six-part series examining the prepaid phenomenon, but with a focus on private employers.
Q: Let’s start with the similarities between public sector and private sector prepaid card programs. How are they the same?
A: Whether the employer is private sector or public sector, the program has to comply with payroll card laws that apply to their state. And employees get access to the same benefits – immediate availability of funds, the ability to withdraw cash at ATMs or receive cash back with purchases, to make purchases or pay bills online, and much more. For the organization, whether public or private, prepaid payroll cards reduce costs associated with check printing and mailing, eliminate the cost of stolen and lost checks and reduce administrative paperwork.
Q: What’s the biggest difference, then? How are government agencies different?
A: The process of securing a provider can be very different. In the public sector, most agencies must go through a public procurement process where providers respond to RFPs and are evaluated on their capabilities and pricing schedules. Those responses and pricing schedules are made available to the general public via a website or through the FOIA process. In the private sector, that information is less accessible.
Q: How do prepaid payroll cards offer functionality beyond direct deposit?
A: Many government employees receive their pay by direct deposit into their savings or checking accounts. Approximately 20 U.S. states have implemented payroll card programs to offer the employee an additional payment option. These same states also use these programs to pay part-time and seasonal workers as well as subcontractors.
A recently introduced feature for payroll card programs offers additional benefits. A companion card is available for any employee who is receiving his/her salary through direct deposit to a checking or saving account. A portion of those funds can be diverted to a companion card on a one-time or recurring basis. Up to five companion cards can be issued where a family member such as a student or caregiver might need a card to access those funds in designated amounts for different reasons.
Q: Are there differences based on the size of the agency?
A: Not many – but the more employees an agency has, the larger the potential savings of implementing a payment card program.
Q: What types of public sector entities are already using payroll card programs?
A: Name any agency or department, and there’s almost certainly one that disburses their payroll this way! Conduent operates programs for public sector entities including state agencies and municipalities in Georgia, Indiana, Oklahoma, Pennsylvania, and Virginia. Some states have expanded their payroll functionality and applied it to other programs such as state teachers and firefighters pension payments in Oklahoma, state retirement benefits in Tennessee, and home healthcare provider payments in Illinois.
For more on prepaid cards:
- Payday, Redefined.
- Why Millennials are Choosing Prepaid Payroll Cards.
- Delivering on the Promise of Prepaid Payroll Cards.