The Least Employers Should Know about Pay Cards

May 15, 2018 By Julie Kramer - Leave a comment

shutterstock_570415852Are you still paying your hourly workforce via paper paychecks? If so, you’re making payday harder and more expensive than it needs to be—for you and your employees.  

Consider this: eighty-two percent of U.S. workers are now paid by direct deposit via ACH (Automated Clearing House). Both employers and employees like direct deposit because it’s secure, it saves time and money, and it gives employees fast, reliable access to their pay, unlike old-school paychecks.  

But direct deposit doesn’t work unless employees have bank accounts. According to the FDIC, 7% of U.S. households are unbanked (no bank accounts) and another 20% are underbanked (they rely primarily on services outside the banking system, even with bank accounts). If you hire hourly workers at near minimum-wage, many are most likely unbanked or underbanked. That’s why they never elected direct deposit in the first place.

This is one reason why pay cards are such a smart option for employers with an hourly workforce. Pay cards—aka payroll cards—allow employers and employees to reap the many benefits of direct deposit, without the need for employee bank accounts.

Like direct deposit, pay cards save employers the time and money required to print and distribute traditional paychecks. For employers managing a remote or distributed workforce, it also eliminates the headaches of distributing paychecks hither and yon on a very tight schedule.   

Pay cards save employees time, too. For one thing, they enjoy immediate access to their wages—there are no checks to cash, deposit and wait on to clear. For employees who happen to be off on payday, it spares them the hassle of coming to work just to pick up a paycheck.      

How Pay Card Programs Work

Pay cards—also known as payroll cards—are reloadable prepaid cards that serve as an electronic alternative to traditional printed paychecks. Every payday, the employee’s net wages are deposited directly into his/her pay card account. It works like direct deposit, except pay card accounts replace traditional checking accounts.

Every pay card program requires three parties: the employer, the employees and their pay card provider. Pay card programs vary widely, so it’s in the employer’s interest to research and compare providers before making a choice.

Employers fund their employees’ pay card accounts through ACH direct deposit, via a designated client portal. In addition to scheduled payrolls, employers should be able to make mid-pay cycle payments as needed, such as expense reimbursements and payroll corrections.

On their end, employees can use their pay cards wherever debit cards are used, whether paying bills, withdrawing cash or making purchases—online, by phone, or in person.

Robust pay card programs include an employee self-service portal and/or mobile app through which employees can access their electronic pay stubs, as well as view their account balance, pay bills, transfer funds and more. 

3 Things to Know about Pay Card Programs 

Pay Cards Must Be Compliant

According to Federal law, employers must offer employees at least one other payroll payment option besides pay cards. In addition, 29 states have enacted regulations regarding pay cards, while another seven offer guidelines. When choosing a pay card provider, it’s important to verify that your selected vendor will ensure your program’s compliance in every state where you do business.

Pay Card Program Fees Vary Widely

One advantage of pay cards is that they spare unbanked employees the check cashing fees they’re incurring every pay period at currency exchanges. However, pay card programs do have fees, and some are more costly than others.

A quality pay card program will be affiliated with a large network of fee-free ATMs, so employees can avoid out-of-network fees. A good provider will be clear about its fee structure upfront and offer easy ways for employees to avoid incurring fees altogether. 

More Employers Are Choosing Pay Cards

Because of their many benefits, pay card programs are growing in popularity with employers who manage a large hourly workforce. For example, Wal-Mart, Sears, and Kelly Services have all adopted pay card programs. In 2017, 22% of American Payroll Association member companies offered pay cards to their employees. How about you?

Ready to Look into Pay Cards for Your Company?

At EPAY, we researched pay card providers very closely before choosing to adopt the rapid! PayCard® Visa® Payroll Card program. After all, we specialize in providing a complete, cost-effective HR and payroll solution to employers managing an hourly workforce. Our pay card program is absolutely free—cards and all—to EPAY customers. And it offers advantages you can’t find anywhere else. Learn more about how EPAY can solve your payroll headaches and download our helpful infographic.


Filed Under: Workforce Management