Although most employees still receive their pay via check or direct deposit, a growing number of employers are offering an additional option: A payroll card. Payroll cards work like debit cards, giving employees immediate access to their pay without needing a bank account.
Payroll cards offer some significant advantages to both employers and their workers. In general, payroll cards cost less than other forms of payment, saving companies money. Employees enjoy the quick access to their earnings and the freedom to make purchases, transfer money and withdraw cash as needed without having to maintain a checking account or go through a credit check to get a bank card. With a service like Bank of America CashPay, your employees enjoy a great deal of flexibility in how they manage their money.
However, before you implement a payroll card program, there are some things you need to do to ensure that your employees get the most from the service and that you stay within the boundaries of the law. Even with all of the benefits of a payroll card, there are some guidelines to follow, or else you could face some stiff penalties. With that in mind, here’s how you can help your employees get the most from your payroll card program.
In many states, payroll cards can only be offered as an option to employees and not the only way to be paid. Even if your state doesn’t have such a rule, it’s good practice to continue offering other methods of payment, i.e., traditional paychecks or direct deposit. Some of your employees are likely to have existing relationships with a bank and may resent having to use a different card to transfer their pay to the bank.
It’s also important that you choose a payroll card that has plenty of local ATM locations where employees can access their money, ideally without fees. It doesn’t make sense to select a provider that only has one or two ATMs in the area, forcing employees to go out of their way to get cash or else have to pay big fees.
Be Aware of Fees
Some payroll cards come with fees, which may be nominal but can quickly add up. Employees shouldn’t have to pay to access their money, but in some cases, card issuers charge fees for making more than one ATM withdrawal, making purchases online or getting cash back from a purchase. Other cards may charge fees for getting a paper statement, checking balances, declined purchases and withdrawing from out-of-network ATMs.
The problem with fees is that in some cases, they substantially reduce the amount of pay that an employee receives, effectively reducing their hourly wages. Employees have successfully filed claims against employers for this reduction, so the Fair Labor Standards Act requires that employers ensure that employees have free access to their full pay at least once every pay period. In addition, some states have laws relating to fees, including a requirement that employees have a certain number of fee-free transactions per month, so before you choose a payroll card provider, evaluate the fees charged and when. Also, be certain that you disclose all fees to your employees when they sign up for the card. Most cards do charge some type of fees, but the more you can limit the costs to your employees, the more enthusiastic they will be about the program— and the less likely it is that you will land in hot water.
When you offer payroll cards to your employees, it’s a good practice to provide education for them on how to best use the cards and keep them safe. Because payroll cards are debit cards, like any other bank-issued cards, they are at risk of being stolen, so employees should know how to secure their card and use it safely. Offer information and training sessions on best practices in card security and inform your employees about how they can prevent their pay from being stolen. Some topics you might cover include creating PINs, shopping online safely and how to get cash safely.
Payroll cards are appealing to both employers and employees for many reasons, but they need to be handled appropriately, or they could prove costly to everyone. By giving your employees to tools they need to use them to their full benefit, everyone will be more satisfied.