The Detroit News recently reported that the State of Michigan is doing away with all paper checks for their employees leaving two option: direct deposit or prepaid debit cards.
We along with the Electronic Payroll Coalition have just issued a set of core principles to help ensure that employees who receive wages on payroll cards are treated fairly. Here are our top five:
Employees must be able to access their full wages, at least once per pay period, without cost.
Employees should be provided an option to check account balances via an automated telephone system and at least one additional electronic option. These should be offered at no cost to the employee.
Payroll cards should not be linked to abusive forms of credit, credit practices and fee-based overdraft programs.
Employees should not be assessed a fee for a replacement card unless they have already received one free replacement card during the calendar year.
Terms and conditions and fee disclosures must be provided in the languages the employer normally uses to communicate employment-related policies to their employees.
While payroll cards offer many benefits to employers, they can create problems for workers if the cards have high and numerous fees or offer payday-loan type credit features, which let a creditor take funds from a paycheck as soon as those funds are available through the card. For instance, payroll cards, like other general purpose reloadable cards, can come with a range of fees that may cut into the employee’s net earnings.
Wal-Mart, the largest private employer in the U.S., announced that it was moving to “100% paperless payroll” for its 1.4 million employees using a combination of direct deposit to bank accounts and payroll cards. An estimated 17.5 million payroll cards were expected to be in circulation in 2010 according to the American Payroll Association.
In addition to the core principles, the coalition is urging employers and states to adopt additional protections, including:
Employees must not be signed up for a payroll card without their knowledge or consent.
Employees must be permitted to withdraw funds without a fee from an ATM in the network offered by the card issuer at least twice a week.
Employees should not be charged initiation, loading and participation fees; account maintenance fees; inactivity or dormancy fees; low balance and declined transaction fees; and fees to obtain a refund by check to close out the card
Employees should be able to enroll easily in a plan providing monthly paper statements, at no cost to the employee, by making a one-time request at any time.
Employees should be provided at least three free telephone calls to a live customer service representative per pay period.
For a pdf of the complete list of the supplemental principles, click here.