Payroll Debit Card Issue Continues to Be Confusing


Employers electing to offer workers the option of being paid via payroll debit card are waiting to see how a few cases in key states are resolved before moving ahead with their own plans. Due to several important court cases and a myriad of legislative efforts over the last 16 months, the payroll debit card issued remains confusing in many states. It would probably be a good idea for employers to hold off on any wholesale changes until things are a bit more settled.

The happenings in New York State offer a good example of the confusion. Regulators in the Emperor State planned to introduce new rules that were to take effect on March 7 (2017). Those rules have been put on hold thanks to a February 16 ruling by the New York Industrial Board of Appeals.

Last fall, a prominent provider of payroll debit cards petitioned the Board to address the regulations, asserting that they were unreasonable and invalid. The petition claimed that the Department of Labor exceeded its authority in drafting regulations that would have all but eliminated the use of payroll debit cards in New York State. The Board agreed, and the rules have been put on hold.

Payroll Debit Cards Okay for Now

The long and short of it in New York is that payroll debit cards are now okay, at least for the time being. Companies can offer their workers the option of being paid with a payroll debit card as long as certain basic rules are followed. For example, the use of such cards cannot present any expense to employees seeking to access their funds. Employees must also consent to the cards; employers cannot force them as the only option.

Similar rulings have been reached in other states over the last 12 months. According to BenefitMall, a nationwide payroll services firm based in Dallas, the general rule across the country is that employees can’t be forced to accept payroll debit cards if using those cards will cost them money. Otherwise, the fees and charges associated with the debit cards amount to employees receiving less pay.

BenefitMall recommends employers keep their options open by offering numerous methods of payment. Direct deposit remains one of the strongest options, as it puts money directly in the employee’s bank account via an electronic transaction that is seamless from his or her perspective. Paper checks and cash are options as well. They are utilized less frequently in the electronic age.

Streamline Your Payroll Processing

The many questions of payroll debit cards raise larger issues relating to payroll processing in general. Issuing debit cards is a way of streamlining the task of paying employees by making one, large-scale deposit into a central account from which debit cards draw. This eliminates the need to issue paper checks among employers, and the need for banks to process those checks.

Having said that, if streamlining payroll is the goal, perhaps a better strategy would be to adopt a more comprehensive solution that streamlines every part of the process from time tracking to payroll processing to tax reporting. An online solution heavy on automation is one way to go.

Online payroll removes a lot of the extra burdens of payroll processing through technology and automation. It makes use of the cloud for data storage and retrieval, gives workers instant access to their own payroll data, and provides for more accurate record-keeping. Above and beyond the confusing payroll debit card issue, companies looking to streamline their payroll should consider moving it online via a service provider like BenefitMall.