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The rise of e-pay: Know your options & the law

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in Compensation and Benefits,Human Resources

By now, you probably give workers the option of direct deposit in addition to paper checks. But more employers are beginning to offer a third option—payroll debit cards, or “pay cards”—especially if they have lots of temps, seasonal staff or “unbanked” workers.

Pay cards are reloadable, prepaid bank cards—not credit cards. Each pay period, the employee’s pay is automatically loaded onto the PIN-protected card and available to the employee on payday.

Employees can use the card to make purchases anywhere they use credit, debit or ATM cards. Some card serv­ices also provide accounts that em­ployees can use to facilitate online bill paying.

Paper or plastic? Direct deposit made life easier for employees, eliminating the Friday lunchtime run (and cost) to cash a check. Pay cards take it a step further by marrying convenient deposits with ease of spending.

But before you call your payroll provider or bank to set up a pay card option, understand the legal and practical risks. The most common—employees’ pay not being properly ­deposited—can be avoided by having them provide you with voided checks or taking their pay card ­account numbers directly from their cards when they enroll.

Also, a majority of states still prohibit employers from requiring their workers to receive pay electronically—either by direct deposit or via pay cards. (Read all state laws at

Overcoming resistance. As long as state laws give employees the option of paper checks, some employees will prefer them. Plus, employees who fear identity theft may prefer paper checks.

Get the ball rolling by actively steering new hires toward direct deposit and pay cards. Include direct deposit or pay card enrollment forms as part of their routine paperwork.

Online resources for employers:

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