In 2020 private companies are issuing payroll debit cards to employees to pay them. There are state regulations on payroll debit cards created to cover the rights of employees that employers must comply with. Prepaid debit cards are also used to provide access to unemployment payments. There are several states that issue unemployment benefits debit cards, which are reloadable. Payroll Debit cards are provided quite often to employees that do not have access to a bank account for one reason or another.
How Payroll Debit Cards Operate
Much like a debit card connected to a bank account set up with direct deposit of payroll, payroll debit cards operate the same way. The only difference between the two is that only funds from payroll can be deposited onto a payroll debit cards, which is unlike a bank account with a debit card. Each payday, the payroll due to an employee are added to the payroll debit card, which has immediate availability. The payroll debit card can be used to access cash at ATM machines, and it can be used to pay for services like rideshare or for goods like groceries. Cash can be drawn out at an ATM with no fee being charged, just so long as it is done at in network bank ATM machine.
Payroll Debit Card Regulations
Regulations on payroll debit cards are more like the regulation for debit cards compared to retail all-purpose reloadable debit cards for sale at retail stores. The fact is they are looked at as a prepaid debit card and not a regular bank account debit card. Retail reloadable debit cards have no regulations covering a consumer’s liability for any charges on the card that were not authorized. Debit cards and payroll debit cards have the protections when it comes to liability. Payroll debit card providers are mandated by law to provide the structure of their fees and provide a process in writing to customer dispute resolution. However, retail reloadable debit cards do not have the same requirements. Both payroll debit card and regular bank debit card providers by law may not make any updates to their card agreement terms without providing notice 21 days in advance. Retail preloaded debit card issuers can make changes to their card agreement terms without providing notice of any kind.
Payroll Debit Card Pluses
The advantages of payroll debit cards compared to paper paychecks are numerous. The most apparent plus is a payroll debit card can be used anywhere anytime and a paper check has be cashed at a bank or check cashing business, which most of the time means a fee must be paid when the check is cashed. The next plus is that the company saves time and money on payroll because it does not have to take the time to print checks and hand them out and it does not have to pay an employee to process and print payroll checks and hand them out directly to each employee. A third plus is that because payroll checks are not being printed it saves the company money on ink and it helps our planets ecology because a tree was not need to provide the paper to print the check on. Each state has regulations about issuing payroll checks or payroll debit cards. Check to see what your state’s regulations are about how you can issue payroll so you stay in compliance with your state’s payroll laws and regulation.
All in all payroll debit cards have their place in 2020. Preferably small business are better off issuing payroll through direct deposit, but one of the next best things is to issue payroll using debit cards.
Companies need to check to see if there are extra fees assessed to employees when issuing payroll themselves via debit card and when choosing a payroll processing company offering pay debit card program. Companies need to offer several ways for company employees to receive their pay. A company is not allowed by law to require employees to receive pay solely by payroll debit card. Employees must be provided several options as to how they receive their wages, not just via debit check card. It has been reported over recent years that some employers didn’t do this for their employees, which is against the law. In response the Consumer Financial Protection Bureau issued a bulletin covering legal regulations covering payroll cards. The main points on the bulletin were as follows:
Fee Documentation – Documentation must be provided of fees
charged by the issuing bank to the employee related the EFTs (electronic fund
transfers) and written explanation about liability limits.
Account Records Access – Regular statements must be given to
card holders by payroll debit card issuers electronically online or telephonically
providing account transaction history and fees charged.
Unauthorized Transfer Liability Limits – Employee’s limit of
liability for use not granted if reported within a specific written time period.
Rights to Resolution for Errors – Payroll debit card financial
institution mandated response to card holder within 6 months of occurrence of mistake
Several different organizations over recent years have provided
statements about the pluses of wages being disbursed to employees via payroll
debit cards and regarding the top ways for employers to make the most of the
program for their employees. The top recommendations included issuing pay without
fees being charged (employer pays the fees) and to provide the wages using the
top credit card brands such as VISA, MASTERCARD and DISCOVER. Employers must also
give complete documentation of fees employees may incur.
Payroll debit cards are a big part of
providing payroll to employees today that do not have a bank account. Operated
correctly, payroll debit cards provide wages at a low cost with speed, easy and
convenience to employees. The program helps both the employer and employee work
together efficiently. Look today with your local payroll company to see if your
company can save money and improve its payroll process each month by starting a
payroll debit card program as part of its payroll disbursement options.
Payroll debit cards are written about negatively from time to time in the press, but it doesn’t mean this relatively new device for delivering payroll should be done away with by companies using them issue wages to employees. Virtually every consumer transaction today to make purchases of goods and services can be done with a debit card. Cash still works, but you cannot use it very easily to purchase a plane ticket for example. Payroll debt cards have both pluses and minuses for employees and employers, but they are widely accepted and provide a huge advantage for a lot reasons. Paying wages through payroll debit cards can be issued by employers themselves or through a payroll processing company.
Advocates talk about how payroll debit cards to employers as a method to lower payroll expenses and improve company effectiveness. With delivery of payroll on a payroll debit card on payday each employee receives their pay via direct deposit on the card. This method makes it easy for companies to reconcile their payroll bank account. Getting rid of printing payroll checks and mailing or handing them out generates direct savings for companies with respect to costs, time and elimination of payroll checks never arriving or getting stolen. Payroll debits cards are a game changer for company payroll processing because they level the playing field for all employees when it comes to payday because everyone gets paid the same time with wages available to all immediately without the need accept a paper paycheck and then go to the bank or a check cashing place and cash it. Payroll debit card programs offered by payroll processing companies in some instances do have fees, making it unfair to employees receiving pay on a payroll debit card.
Payroll debit cards are part of the new era of doing everything electronically. When done right, they provide a convenient and a cost-effective way of delivering payroll and one that is mutually beneficial to both employers and their workforce. Investigate how much money your company can potentially save by implementing a payroll card program and learn how it can streamline your payroll processing.