HR Support on Electronic Pay Cards for Wages

Editor's Note: Check your state laws before paying employees with paycards.

Rena PirsosOverview: 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:

  • Restrictions or prohibitions on fees that can be imposed on employees for using the card or withdrawing funds. In many states, funds must be available with little or no restrictions.
  • The requirement to provide employees with full written disclosure of their rights and responsibilities regarding possession or use of the card in easy to understand language.
  • The prohibition that employers may not require the use of a paycard for some or all of their employees under certain circumstances.
  • The requirement that state employees must participate in a paycard program.

Author: Rena Pirsos, JD, Legal Editor

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