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 include new paid sick leave requirements in Chicago and Cook County, effective July 1, 2017, and the forthcoming Illinois Secure Choice Savings Program.
Updated to reflect a forthcoming law change permitting biweekly wage payments.
The New York State Department of Labor (DOL) has filed an appeal in New York State Supreme Court of the decision that invalidated and revoked final DOL regulations governing payroll debit cards before they could go into effect this past March.
Updated to reflect the permanent implementation of the requirement to pay exempt employees at least once a month under the Wage Theft Prevention Clarification and Overtime Fairness Amendment Act of 2016, effective April 7, 2017.
Updated to include a new law permitting wage payment by payroll debit card, effective May 5, 2017.
Updated to include the Wage Theft Transparency Act, effective April 13, 2017.
Updated to reflect a forthcoming change in pay frequency for service employees.
HR and legal considerations for employers regarding electronic paycards.