What Employers Should Know When Considering Using Payroll Cards to Pay Wages

What Are Payroll Cards?

Payroll cards—also known as payroll debit cards or paycards—are similar to bank debit cards. They are an increasingly popular method for employers to pay wages because they reduce the administrative costs associated with the processing and distribution of live, paper paychecks. Payroll cards can also be attractive to employees, as payroll cards eliminate the hassle and monetary cost sometimes associated with cashing live paychecks.

In a typical payroll card program, the employer chooses a bank or financial institution to issue the cards. Employees who opt for this method of payment establish payroll card accounts with that financial institution. Employers add wages to the payroll cards each pay period. Employees may then use the payroll cards for ATM withdrawals, bank teller withdrawals, debit card purchases, and cash back withdrawals.

As with other accounts, banks sometimes charge fees for the maintenance and use of payroll card accounts. These fees have been the subject of a few recent wage and hour cases and pose some risks for employers who wish to use payroll cards.

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Kevin E. Vance is a partner with Duane Morris, LLP. His practice focusses on labor and employment litigation and other types of business litigation. Mr. Vance counsels businesses on a wide variety of labor and employment matters and drafts employee handbooks, employment agreements, releases, settlement agreements, and opinion letters. Mr. Vance also represents businesses in ERISA litigation matters and ADA public accommodation lawsuits. In addition to litigation in state and federal courts, he represents businesses before the Equal Employment Opportunity Commission, the National Labor Relations Board, the U.S. Department of Labor, and various state and local agencies. He is a frequent lecturer on labor and employment law topics. Julian A. Jackson-Fannin is an associate in the firm’s Trial Practice Group. Mr. JacksonFannin’s experience includes commercial, construction defect, and employment litigation. Prior to joining Duane Morris, Mr. JacksonFannin served as a law clerk to the Honorable Donald L. Graham of the U.S. District Court for the Southern District of Florida.

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