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 final rules on paid family and medical leave payroll deductions, effective January 1, 2019, and legal developments regarding the Seattle Hotel Employees Health and Safety Initiative.
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HR and legal considerations for employers regarding electronic paycards.