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States slow to allow payroll cards despite advantages for employers and employees

Payroll cards are the most recent development in the wage payment arena, but adoption of regulations allowing the use of the cards has been slow. Currently, just eight states have laws allowing employers to use payroll cards as a method of paying employee salaries. Several more states have started to address them, but have not yet adopted legislation allowing or disallowing them.

Reason for delay

Speaking at the 24th annual APA Congress held in Orlando, Florida, Cathy Beyda, Special Counsel with the law firm of Littler Mendelson and Chair of the APA's Government Affairs Task Force Payroll Card Subcommittee, discussed some reasons why acceptance of this method of wage payment has been relatively slow. First, it is possible that some laws were written before the technology was available to allow for the payroll cards to be easily implemented. Secondly, there may still be misunderstandings of what the payroll cards are and how they are used.

Currently, the states of Delaware, Maine, Maryland, Michigan, Minnesota, Nevada, North Dakota and Virginia have laws allowing employers to pay wages on a payroll card. Four more states, Colorado, North Carolina, Oregon and Texas, have posted statements on their websites saying that the use of payroll cards would be allowed. States that currently have legislation pending include Iowa, Kansas, Michigan, and Virginia. States that have seen some activity or are considering legislation on the issue of payroll cards include California, Montana, New Hampshire, Tennessee, and Vermont.

Several states are concerned with the issue of fees when using the payroll debit card. For example, legislation pending in Kansas would prohibit any fees being charged to employees for the use of their payroll card.

Types of payroll cards

When adopting a payroll card system, employers have a choice between branded or unbranded cards. Branded, or signature-based, cards usually have a Master Card or Visa designation and can be used at PIN-based and signature-based outlets. They can be used to rent cars or reserve hotels, or any other purchase that requires a credit card designation. A PIN will still be required for ATM withdrawals. The main disadvantage to employers with the signature-based card, Beyda noted, is that they cannot be issued at the location of employment which increases the time needed to get wage payments to employees..

Unbranded, or PIN-based, cards typically do not have a Master Card or Visa designation, and require that a PIN be entered for all transactions. These cards can be used only at PIN-based terminals, cannot be used to rent cars, reserve hotel rooms, or other such services. These cards can be issued at the company’s location, however, which is seen as an advantage to some employers.

Advantages of payroll cards

Beyda pointed out that there are advantages to payroll cards for both employees and employers. One advantage to employees is ...

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