Paycards, those little plastic cards you can hand to your employees in lieu
of a paper check, have many advantages for employees and employers alike. It
can be awfully tempting, as an employer, to eliminate paper checks in favor
of the less-expensive paycard. Employees like them because they don't necessarily
have to have a bank account, and they can use the cards at any store that accepts
a debit or credit card. And employers like them because they eliminate the possibility
of forged or altered checks, not to mention the additional costs of processing
reams of paper.
Before you jump into mandatory use of paycards, though, you'll want to
check on the labor laws in your state. According to the American Payroll Association
org), you may find that your state has not yet addressed this new technology.
As of December 2004, only three states--Delaware, Nevada, and Virginia--had
taken specific regulatory action permitting the use of paycards. And one state,
Vermont, determined that employers may not use paycards for payment of wages.
In some states, employers are relying on laws covering direct deposits of pay,
while others are choosing to wait until the law is clarified.
One of the sticking points appears to be that employers must pay employees
without charging them any kind of fee. The American Payroll Association says
this caveat dates to the era of company towns, when the employer may have owned
stores, houses, and banks. The rule protected workers from being charged through
automatic payroll deductions for goods or services provided by their employer.
Because the use of a debit card is often accompanied by a fee, some employers
are paying for at least one fee per person, per pay period, to avoid running
afoul of the 'no fees' law.