An increasing number of employers are considering use of payroll debit cards as an alternative to paper checks or direct deposit. These PIN-protected cards are more secure than a paper check, and give employees immediate access to wages. They can also help employees avoid high bank checking account fees. The use of payroll debit cards is governed under state law. While most states allow their use, there are a number of conditions and restrictions that apply.
For example, the North Carolina Department of Labor’s Wage and Hour Bureau allows use of payroll debit cards if (1) the employee has access to all funds as of the scheduled payday; and (2) the employee is entitled to at least one use of the card without any withdrawal or service fees. South Carolina currently has no restrictions on the use of payroll debit cards.
Some employers are concerned that issuance of payroll debit cards tempts employees to immediately spend wages more than would be the case with traditional forms of wage payment. Such temptations could result in employees seeking advances on wages, or productivity issues relating to employee financial problems. Given the growing use of electronic funds transfers and potential savings to employers from use of paperless pay systems, these alternative payroll methods are likely to grow in future years.