We’ve spoken previously about green initiatives in a payroll environment. The easiest way to promote green payroll is to eliminate paper wherever we can, and we can start with paper checks! Paycards are a great way to involve employees in saving time, energy and money. Here are some questions and answers about this popular trend.

Q: What is a paycard?

A: A paycard is a payment instrument, just like a paper check, only better. It can be used at an ATM or bank, or in a retail store.

Q: How do they work?

A: Your employees can be issued a paycard in lieu of receiving paper checks. The paycard will be loaded with the employee’s net pay each pay period. The paycard will work just like a debit card. Instead of a check, the card holds the full net pay, and it is available to the employee at any ATM. A branded Visa or MasterCard paycard can be used for cash withdrawals, point-of-sale purchases or payments.

Q: What do my employees have to do?

A: They just need to sign up. A simple authorization form puts your employees on the way to paperless payroll.

Q: Speaking of paperless…. What does the employee see?

A: An electronic paystub can be provided, giving the employee all his current and Year-to-date payroll and withholding information. The stubs can be made available on the employee’s smartphone if desired.

Q: How do the employees get their pay?

A: Once an employee receives a card and it is activated, you’ll simply create a transaction, or group of transactions, for your bank, just like with direct deposit. The transaction file will show the routing number, account number and the dollar amount of each employee’s net pay. The funds will be available on your scheduled payday.

Q: What are the advantages for our employees?

A: There’s no time lost waiting for a check to be mailed to your employees. There’s no time lost waiting for a deposited check to clear. Once your employee receives a paycard, the funds are added to it electronically each pay period, making the transaction instant, paperless and secure.

Unbanked employees are currently spending money to cash checks at check-cashing establishments with high fees (see graphic). These employees could save a significant amount by no longer using check-cashing places.

Q: What are the advantages of paycards for me as an employer?

A: There are many advantages: fewer paper checks issued means fewer checks lost, replaced, payments stopped, and all the other issues that can arise from creating, distributing or mailing paper checks. You’ll also save on printing costs when you don’t have to print as many checks. Payroll providers often charge for each check that they print.


Q: How can I sign up for the service?

A: There are many providers available who offer paycard services. Choose one that works in your industry or one that’s local to you. Tailor the service to your employees. There is a great information site available through the American Payroll Association. Go to: http://paycard.americanpayroll.org/

Q: Are there any legal issues with paycards that I need to know about?

A: Look at your state payday laws, which generally govern legal methods of paying employees. In some states, it’s legal to use paycards with or without employee approval, and in some states, you must have employee authorization to pay in any other way than paper check. Don’t undertake the project until you have completed your due diligence.

Q: What if we are in multiple states?

A: The wage payment statutes and regulations in most states were written well before paycards were envisioned. Fortunately, this area of law is rapidly evolving and catching up with modern wage payment technologies. To date, at least twenty-four states have updated their wage payment statutes and/or regulations to expressly permit the use of paycards.

These states include Arizona, Colorado, Delaware, Florida, Georgia, Hawaii, Illinois, Kansas, Maine, Maryland, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, North Dakota, Oregon, Rhode Island, Tennessee, Utah, Vermont, Virginia, and West Virginia.

In addition, the Oklahoma Attorney General has issued an opinion letter recognizing paycards as a permissible method of electronic wage payment. The wage and hour enforcement agencies in the vast majority of the remaining states have adopted enforcement positions permitting the use of paycards provided certain conditions are met.

The enforcement agency is only one state, Connecticut, continues to take the position that a legislative amendment is necessary before paycards may be used in the state. The New York legislature has legislation pending, and the American Payroll Association (APA) has filed comments on the proposals.

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