Article
Pushing the (pay) envelope
For companies with non-traditional workforces, the ATM offers a better way of reimbursing their employees.by Ann All, editor
March 11, 2002
Labor Ready pays its workers at the end of every shift. In 1998, that added up to a staggering six and a half million payroll transactions for the Tacoma, Wash.-based temporary agency.
Installing a fleet of Diebold 1064ix ATMs in more than 600 of its employment offices helped Labor Ready streamline the payroll process and reduce its check processing fees. And the company says its workers, many of whom are young males without a bank account, like the option of collecting their pay directly from an on-site ATM.
Labor Ready workers returning to the office after their shift opt to receive either a traditional paycheck or a pay voucher. Those receiving vouchers key in a 12-digit number at the ATM and are reimbursed for a day's work, less a small processing fee.
According to Shannyn Roberts, Labor Ready's corporate communications manager, pay amounts are rounded off and workers pay a $1 processing fee. Thus, a worker who earned $52.33 would receive $51 after $1.33 in charges were deducted from his pay. Roberts said the average fee is about $1.50.
"Many of them don't have bank accounts, so their option is to go down the street to a check-cashing service and pay more (than $1.50) to get the check cashed," she said. "It's more cost effective for them to do it at the office, and a lot of people just want cash on the spot."
It's an especially nice perk for second-shift workers and others with non-traditional schedules. Cash in hand is "a great benefit if you're coming in from work at midnight," Roberts said.
A third of Labor Ready's dispatch offices are open standard hours, while another third cater to second-shift workers and the remaining offices are open 24 hours. Offices are located in 46 states, Canada, Puerto Rico and the UK.
Machines were installed in the first half of 1998. By the second quarter of 1999, Roberts said, 58 percent of workers were collecting their pay at an ATM.
Diebold provides first and second-line service. Brinks and other armored car companies replenish the cash.
"We are not in the cash machine maintenance business. We have no desire at all to get into that area," said Bob Sovern, Labor Ready's director of credit and collections.
Sovern said the company chose Diebold's 1064ix for its durability and security features. The units have no card reader or receipt printer; they can be added later, along with additional cassettes or other upgrades.
That may be an important consideration as the program evolves. The newest feature: Labor Ready will distribute coupons that can be redeemed at a nearby retailer. The company is also considering offering stamps, prepaid phone cards and money orders at the machines.
"We're trying to enhance the use of the ATMs without having a negative impact on our workers or our margins," Sovern said. "We're in discussions with a prepaid phone company now. Lots of our workers don't have phone service."
The company is looking at Diebold's 1062ix, which features a coin-dispensing option. That would be a necessity in both Canada and the UK, where many of the most common denominations are available only in coin form.
According to Sovern, the program's success has attracted the interest of ISOs and others interested in adding the Labor Ready machines to their networks. However, the company will keep its system proprietary -- at least for the time being.
"We don't really want to become involved in issuing plastic cards and all that. Frankly, it would be a hassle," he said. "We need to stay focused on what we do, and that's dispatch workers."
Get smart
In Mexico, the 600-branch Grupo Financiero Banorte SA is experimenting with a smart card-based payroll application called CardStore that was developed by ICL, a Fujitsu subsidiary, and Victor, N.Y.-based NetLink Transaction Systems Corp.
Banorte is implementing the application at maquiladoras, or manufacturing plants set up by the U.S. in border towns following passage of the North American Free Trade Agreement.
"NAFTA gave them certain benefits they did not have before," said Mary Hoover, ICL vice president of marketing. "So, consequently, there are lots of large plants down there where people get paid on a weekly basis and they get paid in cash."
Factory workers in towns like Monterrey will swipe cards through a reader when entering or leaving work. The card then becomes a sort of "virtual paycheck," Hoover said. "The equivalent of their time is all stored up on the card at the end of the week. It essentially carries the money they are owed."
Workers, most of whom do not have bank accounts, can collect their pay from Fujitsu Series 7000 ATMs installed at the work site. "They can withdraw as much money as they'd like," Hoover said. "They can take only as much as they need and leave the rest in the ATM." That option provides an added level of security for the workers.
The card uses fingerprint biometrics as a fraud preventative. When workers sign up, they provide a fingerprint, using any finger they choose. They place that finger on a scanner each time they clock in and out and when they collect their pay. Workers can opt to use a PIN instead of a fingerprint.
The fingerprint also protects workers in the case of theft. "If somebody took your smart card, they'd need your fingerprint in order to be able to utilize it and get money out," Hoover said.
ICL decided to use fingerprint scanners partly because they're less expensive than other biometric recognition equipment.
"We wanted the broadest use possible of this application, so we tried to keep the cost as low as possible," Hoover explained.
Don Sweet, president of NetLink, said the CardStore system lets Banorte provide payroll services and savings accounts to workers at about half the ordinary cost.
Hoover agreed, saying, "The reason Banorte is doing this is not only to provide a service to the customer, but to greatly reduce bank costs in dealing with those accounts."
According to American Banker, Prudencio Frigolet, Banorte's executive director of new technology development, predicts the service could ultimately reach up to one million factory workers. Frigolet spoke at last summer's Technobanca, a conference sponsored by American Banker and InfoBanca, a Mexico City company that publishes the monthly BancaLatina.
Hoover thinks the CardStore system could expand to other countries with large manufacturing plants, including the U.S. "Even if (workers) have a checking account, I think there's a certain segment of the population that likes to get cash," she said.
Hey, is that Juan Valdez?
For those whose only exposure to Central American coffee plants has come through TV commercials featuring Juan Valdez and a donkey, it's hard to imagine an ATM fitting into the picture.
Yet about 30 coffee processing plants in Costa Rica pay farmers and other workers at Triton 9600 ATMs. A Costa Rican Triton distributor called TII Smart Solutions wrote its own software to work in a closed-loop environment and issued magnetic stripe cards to workers.
According to Tony Lachner, TII's general manager, about 10,000 workers are reimbursed this way.
The ATMs are more efficient and safer than the previous method of distributing pay.
"Prior to this application, they had two or three armed guards showing up every Friday with a wagonload of cash," said Ken Paull, Triton's vice president of sales and marketing. "Costa Rica is a relatively safe country; still, in any country, someone carrying a lot of cash is susceptible to harm."
Much like ICL's CardStore application, workers can opt to take their colons (the Costa Rican currency) in increments rather than one lump sum. And, Lachner said, "they can use their cards at any Visa merchant in the world."
Paull isn't surprised that TII came up with the innovative application. "These folks are pretty creative. They're also one of the few people who have installed our units outdoors, after creating special enclosures for them," he said.
That kind of creativity could serve American deployers well, Paull added.
"As people get concerned about penetration and saturation in our marketplace, I think payroll applications could be a real nice fit. These are some of the types of things that creative people should be looking at in the U.S."
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