Overview: Paycards, or payroll cards, are a fast growing method of paying wages to employees using electronic means. They are a good alternative for employees who do not, or cannot, have a bank account that is capable of receiving direct deposits. Approximately 10% of US employees fall into this category, with the greatest number of them working in industries such as hospitality, food service and agriculture.
Federal paycard laws and regulations generally mirror direct deposit laws. Employers' paycard accounts must meet the same legal requirements as direct deposit accounts. An increasing number of states have passed a paycard law, and there is much variation among these laws. Employers must comply with all applicable federal and state laws pertaining to paycards.
Trends: Employers should check the laws of the states in which they pay employees for variations from federal law. Depending on the state, a number of additional restrictions or guidelines may apply. The following are some examples:
Author: Rena Pirsos, JD, Legal Editor
Updated to reflect the forthcoming requirement to compensate employees for certain work schedule changes under the Seattle Secure Scheduling Ordinance.
The New York State Department of Labor has issued final regulations governing the use of paycards and direct deposit to pay employees' wages. Although the law in New York already permits employers to pay employees via these two popular wage payment methods, the final regulations provide many new detailed requirements and restrictions. Employers should act now to be sure their procedures, policies and required forms will be in compliance by the March 7, 2017, effective date.
Updated to include the forthcoming addition of final paycard and direct deposit regulations.
Updated to reflect new paycard law, effective October 1, 2016.
Updated to include the important new requirement to notify employees who have unclaimed wages, effective September 11, 2016.
Updated to reflect the forthcoming Chicago paid sick leave law.
Updated to reflect the payroll implications of the forthcoming Minneapolis Sick and Safe Time Ordinance.
HR and legal considerations for employers regarding electronic paycards.