APEX: PacSun Case Study Illuminates Corporate POV on Payroll Programs
By Adam Perrotta, Assistant Editor
When clothing retailer Pacific Sunwear of California had trouble locating many of its retail associates to deliver paychecks in the wake of Hurricane Katrina in 2005, the company realized it needed an easier and more efficient way to pay its employees. “We had paychecks, but we had no way of getting them to our employees.
The Credit Question
A function that has yet to find footing in payroll is small-dollar credit, the ongoing subject of debate among program providers that note the possibility for misuse, increased costs and extra regulatory scrutiny that credit could bring to a segment that has been subject of criticism by the media and lawmakers of late.
During the APEX panel discussion on payroll, representatives of several large payroll card providers addressed the credit issue. While opinions differed slightly, there was a consensus that credit—in the form of wage advances or overdraft—has no place on payroll platforms, at least for now.
“It’s a slippery slope, and from an employer’s perspective it brings a whole new element of risk into the situation, so we generally recommend to stay away from credit, overdraft and loan fees,” said Mark Putman, senior vice president, First Data Global Prepaid, which operates the Money Network Payroll Distribution Service, a multiple Paybefore Award-winner. Putman pointed out, in some cases, an employee with an overdraft in one pay period might then receive less than his full wages during the next pay period—a situation that could put the employer at risk of violating state laws.
“Overdraft or any type of credit product tied to a payroll card are things we don’t get into,” added Anthony Peculic, senior director, product strategy and management for ADP’s ALINE Wage Payments platform. “We feel credit and payroll cards should be separate. The industry has a lot of hurdles as it is, so we don’t need to bring this in and cause more scrutiny.”
But some observers say one day there could be a place for credit features on payroll cards, once the regulatory dust clears and proper provisions are in place. “Our premiere duty right now is to educate people about the value and the low level of risk of the payroll product,” noted Nora Arpin, director, Comerica Bank, which is an issuer for several payroll card programs. “But it’s important to consider what consumers need. There is a place potentially for a linkage [of credit and payroll] under very controlled circumstances, but I don’t think the controls are there yet.”
By the time they were able to tell us where they were, two days later they were somewhere else,” said Linda Pappillion, senior director, payroll, HR operations for PacSun. Speaking on a panel devoted to electronic payroll at the All Payments Expo (APEX) in Las Vegas earlier this month, Pappillion provided insight into the company’s experience with adopting and operating a payroll card program, providing an often-overlooked voice in the ongoing discussion about payroll cards—that of the employer.
With a large portion of PacSun’s retail staff part-time and underbanked, Pappillion noted, the company’s payroll prior to 2012 was largely dependent on paper checks that included significant costs for PacSun—which had to print and ship the checks to all 700 of its retail locations—and for the employees, who often had to use check-cashing services to access their wages. So, it was with cost saving in mind for both parties that the retailer adopted the Paybefore Award-winning ALINE Pay by ADP electronic payroll platform.
ALINE Pay has since become a cornerstone of PacSun’s payroll operations, with every employee—from executives to seasonal sales staff—receiving a card upon hiring. According to Pappillion, the card has become popular with associates. She attributed the success to extensive training, communication and a phased rollout that enabled the company to tweak its approach as it went.
“We rolled out [ALINE Pay] to our HR staff three months before our associates, so we could see what the experience was like ourselves,” noted Pappillion, who said she uses her card regularly. PacSun’s HR staff kicked the tires of the program, testing all of ALINE Pay’s customer support and error resolution functions. When the card rolled out to retail employees, PacSun held extensive training sessions and encouraged high-level managers to participate and learn about the platform to assist their staff members with questions.
“Oftentimes, when retail and warehouse associates have questions about the card, they don’t go to HR or payroll, they go to their managers, so we wanted the managers to be familiar with the cards as well,” Pappillion said. Along with training, PacSun used every available opportunity to communicate information about the program to employees, from tabletop flyers in the corporate cafeteria to inserts included with paychecks. “Communication is key when rolling out a [payroll card] plan. It will determine the success or failure,” said Papillion. “You can never communicate too much.”
Click here to find out more about our other Outstanding Pay Solution winners in this year’s Paybefore Awards.