Employee purchase plans: empowering employees

Employee purchase plans are a great new trend in employee benefits.

Just like everyone else, employees need things for their lives outside of work. This includes: typical appliances (washer/dryer, dishwasher, refrigerator, etc…), computers (laptops, desktops, etc…) and other household items. Often employees do not have the necessary cash flow to purchase these devices outright and must finance them through a credit card.

Obviously, credit card purchases can have adverse financial consequences for the employee (high interest rates (and payments), larger debts if not paid in full each month, lower credit score, etc…) if not properly managed. Many employees only have the credit card option to finance their purchases.

A nice solution for employee and employer are: Employee Purchasing Plans

What are these types of benefit plans?

Employee Purchasing Plans (EPP) are voluntary employee benefits that allow the employee to make purchases through monthly payroll deductions instead of through a credit card.

Here’s how they work:

The employer works with a benefits company to set up an EPP for their employees (note: to set this up, the company must have more than 250 employees). There are no costs for the company to set up the EPP. AND, more importantly for the company, no financial or fiduciary risk. In addition, employees who purchase items during the initial onboarding phase receive a discount.

Once the plan is in effect, employees will be able to purchase items (brand name devices delivered to their homes – all done online) through a company-linked website and have them deducted from payroll monthly for a year. Prices are similar to retail stores, except for a small fee built into the price for default risk (much, much less than credit card interest, since the employee pays for the item before paying himself). In addition, if the employee leaves, the employer is not liable for the purchase and the EPP back-end processing company has no recourse against the company. It is the employee’s purchase and his responsibility to pay whether or not the employee leaves mid-year with any remaining payments.

Employee purchase plans can be a real win-win for employers and their employees. The employer can significantly improve its benefits package (for free, with no financial or fiduciary liability and with limited effort) and its employees can gain flexibility in the purchase of major household appliances and electronics through automatic payroll deductions. You may want to see if an Employee Purchasing Plan is right for you and your company.