4 Ways Help To Keep Your Company Safe With Employee Pay Cards

Pay CardAs in most areas, the U.S. is behind most of the rest of the world in how employees are paid their wages. Employers in most other countries only pay their employees electronically via direct deposit to a bank account or through a pay card. In the U.S., employers are pushing for electronic wage payment to all employees. The main reasons for this push are not only the reduced work of printing and reconciling paper checks, but also for business continuity reasons as well. If something happens to the physical business location, it can still ensure employees are paid if they are on an all electronic wage payment system.

However, in the U.S. many employees either cannot or are not willing to open a checking account to obtain direct deposit from their employer. In these instances, the employer may opt to offer a pay card to these employees. With a pay card, the employee’s funds are direct deposited onto the card and the employee can use the card like a bank debit card to make purchases, withdraw cash, and pay bills.

There are fees associated with these pay cards, though, and there are current class-action lawsuits associated with the requirements of employers using these cards for employee payment if the employee does not have a bank account, specifically the fees associated with these cards. The fees vary by company used, and can include:

  • Card / account setup fees
  • Withdrawal fees from ATMs
  • Monthly statement fees
  • Foreign ATM fees
  • Point of sale fees
  • Replacement of lost or stolen card fees
  • Fees to obtain cash back at the point of sale

If the employee does not have a bank account and are cashing their checks at a check-cashing business, then they are likely already paying fees; however, these fees are a one-time fee and not recurring fees for using the card ongoing.

As a business, if you are looking to offer, or already offer, pay cards to employees, there are a few things you can do to lower your legal risks and ensure your employees understand what is and is not included with their pay card:

  1. Compare Pricing / Companies – as with any program you’d want to bring to your employees, shop around. Make sure you are bringing the best program with the lowest fees to your employees.
  2. Communicate– make sure your employees understand what the fees are for, when they will be charged, and how much the fees will be. Unexpected surprises can get you into hot water with your employees, lower morale, reduce retention, and create an overall just plain bad atmosphere. If there’s anything you don’t want to do in business is mess with your employee’s pay.
  3. Obtain a Consent Form – after explaining the pay card program, fees, benefits, etc. obtain a consent form for each employee participating in the program that outlines the program and that they understand what it involves. This will help reduce mitigation in the future.
  4. Revisit Yearly – revisit the program, company you are using, and any increase in fees on a yearly basis. This will help ensure the program you are offering your employees is still in their best interest. Be sure to communicate any changes or updates to your employees.

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