Magazine article HRMagazine

Bank on Savings

Magazine article HRMagazine

Bank on Savings

Article excerpt

Low-cost bank-at-work benefits drive payroll processing costs down.

Bank-at-work programs provide that "something new" to your benefits offerings without increasing costs. These programs give employees free and discounted banking services. There's a benefit for employers, too: When employees have their paychecks electronically deposited in their accounts, employers' payroll administration costs shrink.

The University of Massachusetts' primary goal in offering a bank-to-work program was "to assist the employees with selecting a financial institution without telling them where they need to bank," says Philip J. Marquis, assistant vice president for central administrative services and associate treasurer for the university. "Our secondary goal was to increase direct deposit" participation.

The resulting reduction in payroll administration activities can save a great deal of money. For example, with direct deposit the employer does not have to reconcile outstanding checks or deal with state reporting paperwork for uncashed checks. "That is a tedious process that requires resources to manage," says Felicia Cheek, director of the global payroll advisory program with The Hackett Group in Atlanta.

According to NACHA-the Electronic Payments Association, it costs a business up to $2 to issue and process a hard-copy check, vs. 35 cents or less for direct deposits. Because many state laws prohibit employers from making direct deposit mandatory, employers need to convince employees to enroll. Employees who do not have bank accounts or are not motivated to sign up can keep participation rates down. "Employers still issue quite a few paper checks-primarily because it is the employees' choice, not the employer's choice," Cheek says.

Sign-up Bonuses

Employees may be enticed by discounts and services to sign up for bank-at-work programs and direct deposit. As a result, banks gain customers, and employers that make direct deposit a requirement for bank-at-work participation reduce payroll costs. Banks often provide further motivation for employees to open an account and sign up for direct deposit by offering cash incentives or gifts.

Of course, having a bank-at-work program does not mean employees who have trouble opening checking accounts-for example, because of credit problems-will automatically be able to do so. However, even those employees can open savings accounts and sign up for direct deposit to those accounts, Cheek says.

Weinberg Campus, a retirement community in Buffalo, N.Y., requires employees who choose to participate in the bank-at-work program to sign up for direct deposit. However, cash bonuses are often necessary to get employees to change long-standing banking relationships, says Chris Suszek, PHR, Weinberg's benefits administrator and human resource information system analyst. "The gift or cash bonus must be large enough to get them to switch" banks, he says, noting that a $100 bonus for new direct deposit customers has generally been sufficient. In addition, the program's bank has offered other promotions, such as money toward mortgage closing costs and discounted loan rates, to help drive direct deposit growth.

For Weinberg Campus, these types of bonuses have been effective. Of more than 500 full- and part-time employees, Suszek estimates that about 60 percent have signed up for direct deposit as a result of the bank-at-work program.

Choosing Banks

Bank-at-work programs are mostly free to employees and employers, less minor administrative costs, such as for the employer's staff time spent evaluating and contracting with bank partners and communicating with employees about the program. But a number of criteria should be weighed when choosing the banks to invite into a program.

Historically, bank-at-work programs have focused primarily on discounts, including savings on safe-deposit box fees and lower interest rates on loans and mortgages. Now, however, more banks are offering education on financial topics. …

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