Most people are familiar with direct deposit and paper checks as methods of receiving pay from their employers. But what many businesses may not be aware of is that there is another method of payment that can be used to pay employees. Pay cards can be used as an alternate form of payment that businesses can offer, and some employees may prefer pay cards over the more “traditional” forms of payment.
So, what are pay cards?
These are cards that are usually branded with a major credit card carrier and issued to employees when they opt-in to receive part or all of their pay via this payment method. Then, on each payday, funds are electronically transferred to the employee to access using the card. Employees can withdraw cash from ATMs, request a cash advance from a partner financial institution, or use the card to make purchases just as they would with any other debit or credit card. Some pay card providers also allow the use of checks to write against available funds or have mobile apps and web interfaces the employees can use to initiate bill payments or transfer funds to other accounts.
What are the advantages of pay cards?
Since the funds are electronically transferred on each payday to employees’ pay card accounts, there is no risk of checks getting lost and employees can save themselves from the hassle of getting the checks cashed. Pay cards can also be a great benefit for employees who might not have the ability to open their own bank accounts due to accessibility or other issues. With so many transactions and services requiring a valid debit or credit card, pay cards allow non-banked or under-banked employees the opportunity to take advantage of payment options that would otherwise be unavailable to them. Employees generally are allowed to keep their pay cards and continue to use them even after separating from the employer who originally issued the cards. Pay card providers may also provide additional benefits in the form of reward points or special retail partner programs and discounts.
It might seem redundant and unnecessary for someone who has direct deposit to take part in a pay card program, but these employees can benefit from pay cards, too. By controlling the amount of their pay that goes to the pay card account, employees can use this as a tool to help with budgeting. And, if the pay card becomes lost or stolen, they can be easily and quickly blocked and reissued without the employee having to deal with their bank.
Can I require employees to use pay cards?
Before going all in on a pay card program for your business, it’s important to know that not all pay card programs are created equal. Some states also have specific rules and requirements for pay cards, so compliance should be a major consideration in the decision-making process. There are several large and reputable companies out there that provide pay card solutions, and adequate research should be done to make sure the business is partnering with the provider that makes the most sense for its employees. And most importantly, the organization’s payroll team should have the adequate resources and know-how to effectively implement and maintain a successful pay card program.