August 22, 2013
Recent media stories have criticized the fees on payroll cards, a form of prepaid debit card offered by employers to pay wages. Though we represent different constituencies (low income consumers and payroll administrators), we agree that payroll cards can offer unbanked workers an economical, safe and convenient way to receive their wages. For these workers, payroll cards can mean no check cashing fees, greater security without the risks of cash, access to pay despite natural disasters and the ability to make purchases over the internet and by telephone.
But not all cards are created equal. Following the right guidelines can result in a payroll card program that is mutually beneficial for both workers and employers.
Employees must be able to access their full wages in cash at least once each pay period without fees. Free and clear access is required by the state wage and hour laws and is critical to the success of any payroll card program. Common methods of cash access include bank teller transactions, ATM withdrawals, convenience checks and cash back from point of sale purchases.
Employees must have a choice of wage payment method and be able to change it. Under federal law, employees may not be required to receive their wages on a payroll card and must have the choice of another payment method, typically direct deposit to an account of the employee's choosing. State wage and hour laws may also require a choice of a paper paycheck option. Employees should know how to change their selection if they want to do so.