Question

What is a 'pay card'? Do you think this approach to payroll would be effective at your place of employment? Why or why not? What are advantages and disadvantages of same?

Answer 1

Pay-cards are prepaid cards just like Debit card which cannot be used to take credit. It is being offered in today’s market by lot of tech companies.

The money amount is placed on the employee's card directly by the company through online transaction so employees can purchase items or withdraw money from an ATM as if it were a debit card. This is really helpful for the company who are having huge network of Marketing Reps, Big Field Operation Teams. Let’s discuss how it is advantageous or disadvantageous.

Advantages:

• Money remitted through Online transactions, no much hassle
• It’s a prepaid card, one cannot withdraw more than the set limit
• Quick transmit of money
• Convenient for field workers for their expenses
• Cards come with an option to click the images of bills, doc for the expenses paid. Same bill can be loaded to transaction which becomes easy for the company to track.
• Option of blocking cards is also given to the Administrator
• Quick accounting is in-built in whole package which facilitates all the petty expenses in one go in structured manner.

Disadvantages:

• Good for petty cash expenses but not for big expenses.
• There is always a financial risk of the higher amounts, to tackle this company sets a certain limit for employees.
• Fees paid to the intermediary platform for facilitating card and online support for accounting, free drive for bills etc. While Bank deposits are free.
• Employee may siphon the money
• Internet connectivity can disturb the whole process.
• A Margin of money is always lying with some cards blocking a small amount of working capital.

Applying technique to payroll:

• Imagine one getting money in this card. For 12 salaries, one will have to carry this card and company will have to pay activation charges, membership expenses for these cards. Now, If Company has to process payroll for let’s say 4000 employees; It will end up incurring extra charges.
• Some employee may not be able to secure card safely which will not be acceptable to company as well as employee.
• Company would like to negate their risk by simply putting bank money deposit 12 times in a year rather than taking headache for cards.
• Employee will also feel forced to carry this card. He would be happy to operate from one account since it eases in taxation, accounting and all.
• This technique is good only for cash expenses where it can be issued to regular spenders of small amount, say Marketing reps, Field Operation, Quality team. Company would not credit the payroll in their card since this card is never meant for transferring any income.