Bank On Savings

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

By Joanne Sammer Jan 1, 2012
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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.

Assessing Banks

  • When choosing banks for a bank-at-work program, consider:
  • Financial health of the institution.
  • Basic services.
  • Additional services, such as workshops and loan discounts.
  • Conveniently situated branches in relevant geographic locations.
  • Ongoing commitment to serve the region.
  • Number of employees currently served.
  • Communication support the bank will provide, such as enrollment kits or representatives on-site during open enrollment.

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.

In many cases, these workshops are designed to enhance employee productivity by helping them deal with personal financial issues. "Employers are asking us to help employees deal with economic matters," says Paul Corrigan, senior vice president of Citizens Financial Group, based in Providence, R.I. "Financial stress can lead to distracted employees who are less productive and more prone to absenteeism."

The bank-at-work services offered by M&T Bank, based in Buffalo, N.Y., and Citizens Financial Group, for example, include workshops on budgeting and other aspects of personal finance. Some banks offer one-on-one financial planning, usually as a way to introduce employees to bank products such as college savings accounts. HR professionals can evaluate potential partners based on how much financial education the banks provide, as well as the quality of their services and their willingness to provide the types of resources employees prefer.

For example, M&T Bank offers on-site workshops on topics it identifies through discussions with the employer and surveys of employees. Popular topics include identity theft, managing personal credit status and budgeting, says Karen Chase, an M&T Bank vice president in Rochester, N.Y.

After Weinberg Campus established its bank-at-work program, it quickly became apparent that many of the company's employees lacked basic knowledge about banking and finances. Weinberg has a relatively young workforce, with 10 percent of the employees under age 21. Suszek says most employees are opening their first bank accounts and many don't know how to use the accounts properly. Company officials worked with bank representatives to expand program benefits to include seminars that feature one-on-one coaching and training.

Practical Matters

There are also practical considerations when it comes to choosing bank partners. While some companies stick to one bank, others open their doors to many. Employers need to consider whether the banks' locations serve all employees. Even with growing use of electronic banking, individuals often need to visit branches.

Weinberg Campus officials have considered expanding beyond one bank but are being cautious because some banks may not be committed to maintaining operations in some areas. For example, Suszek notes that one major bank is pulling out of the Buffalo area. He urges employers to make sure that participating banks are committed to maintaining branches near company facilities.

Existing relationships can be a strong criterion for selecting a bank to partner with. JetBlue chose two banks based on established relationships with the company. The University of Massachusetts limits invitations to banks where employees have relationships and sets criteria for partners.

About five years ago when the program began, university officials partnered with 10 financial institutions that provide direct deposit for 100 or more employees. During an annual program review, they invite other banks that serve at least 100 employees to participate. Today, the program offers services from 24 banks.

When extending the invitation to participate, the university requires officials at each bank to sign a five-year agreement and specifies that the bank must provide a minimum level of services. Those services are:

  • Free checking accounts with no minimum balance or per-check charges.
  • Free access to proprietary ATMs.
  • Free first orders of checks.

However, the banks are allowed to offer additional free services and discounts beyond the required minimum, such as discounted loans, free safe-deposit boxes and no-fee credit cards.

"We do not require our employees to choose a bank from our bank-at-work program, but the program provides a convenient opportunity to compare benefits to assist employees in making their choices," says Mark Preble, the university's director of human resources and labor relations.

The university limits employee participation in the bank-at-work program to 26,000 of its 31,000 faculty, staff and student employees who have signed up for direct deposit. However, the educational institution has not measured the impact that the program has had on direct deposit enrollment.

The University of Massachusetts, and others, limit bank-at-work participation to employees who use direct deposit.

To make using the bank-at-work program easier and to encourage more direct deposit, the university has linked the program to its HR self-service portal. Employees may enroll in direct deposit and change banks online, Preble says. In addition, most employees using direct deposit do not receive printed paper pay slips; they view current or prior pay slips through the portal.

Bank Visits

When it comes to communicating with employees about bank-at-work programs, many employers are content to leave it up to the participating banks. JetBlue allows the banks to communicate with employees during on-site visits. The company posts information about the bank-at-work program on its intranet and sends employees e-mail reminders about the banks' webinars.

Similarly, the University of Massachusetts schedules vendor visits and holds "campus banking days," when all participating banks are invited to promote their services. It also invites bank officials to visit the campus individually so that they can provide information about their offerings. The university publicizes the bank-at-work program through its website and in orientation programs for new employees.

A representative of the bank participating in Weinberg Campus' bank-at-work program routinely visits the company during biweekly orientation sessions and during the annual benefits open enrollment period to sign up new employees.

Employers should foster ongoing communication with participating banks. Periodic meetings to make sure the program is on track and to share what financial education employees might need can help keep bank-at-work programs interesting and relevant.

The author is a New Jersey-based business and financial writer.

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