Debit Cards For Payroll? Did You Ever Hear Of That Before?

Ed the Roofer

It was an interesting article to read about how one method to pay the illegals or those who do not have bank accounts get around the issue.

http://www.calbizcentral.com/HRC/New...ebitCards.aspx

I never heard of such a thing before.

Maybe I can make up a whole bunch of those Gift Cards and present that to a whole bunch of illegal sub crews? Whatcha Think about that?

Ed




Paycheck to Pay Card?




Employers have long used prepaid debit cards to issue payroll. The market research firm Mercator Advisory Group estimates that about $11.3 billion in U.S. wages were paid through prepaid cards last year. But until recently, those payments were largely aimed at lower-income individuals without bank accounts. Now, such cards are becoming increasingly commonplace for paying international employees and contractors, and companies such as Payoneer, Transcard and USA PayCard are banking on huge growth in the debit card payroll industry for 2008.
A prepaid payroll debit card works essentially like any other debit card. Money is "loaded" onto it by an employer, using bank transfer, credit/debit card or cash. Funds are then held in a PIN-protected account for the employee and are accessible almost immediately. With Payoneer cards (which are part of the Mastercard network), the employee can use the prepaid card to make purchases at any establishment that accepts MasterCard. Additionally, employees can use the cards to make cash withdrawals from ATMs supporting the MasterCard logo.
As with any ATM card, prepaid debit cards carry some limitations on usage. For example, the cards will only be accepted by ATMs with logos matching the logo on the back of the card (such as the "Star" or "Plus" network). Additionally, the ATM operator may set limits on the amount that an employee may withdraw, and may charge a fee for completing the transaction. Certain cards are also subject to daily loading and spending limits by the card issuer.
An additional problem for employees may arise should the balance on the card become too small for withdrawal at an ATM. Most ATMs issue payments in minimum increments (typically $20 in the U.S.). Once the amount remaining on the debit card drops below that minimum increment, an employee would not be able to "cash out" at an ATM.
Instead, with Payoneer, the employee would only be able to access the remaining funds by making a purchase at a retail establishment that accepts MasterCard, and using another form of payment for the remaining amount of the purchase. Other cards, however - including Transcard - allow users to transfer balances from the card to their bank account. Employers considering whether to use a prepaid debit card for employee payroll should therefore investigate options for accessing small balances on those cards.
A Simple International Solution

Prepaid debit card issuers are seeing significant growth in the use of their cards to pay international employees. These workers are often subject to hefty wire transfer fees, ATM withdrawal fees and other hassles before they can get their paychecks.
"Paper checks get lost or stolen overseas often, and banks overseas can hold funds for up to 30 days and charge high foreign currency exchange rates," Yuval Tal, CEO of Payoneer, told the E-Commerce Times.
Prepaid debit cards, on the other hand, offer employers the ability to immediately transfer funds to employees anywhere in the world, and allow employees to quickly and easily access money in their home currencies, without the necessity of opening a foreign bank account. Card issuers also assert that transferring money to employees using debit cards is significantly less expensive than paper checks (often the only alternative for employees without bank accounts). According to the American Payroll Association, it costs an employer between $2 and $10 to issue a single paper check. Direct deposit and prepaid debit cards, however, may be less than 50 cents per transaction. Due in large part to this ease of use, analyst firm Celent predicts that the use of alternative payment methods such as debit cards will more than double by the end of 2008.
Fees and Legal Implications

Despite the claims of prepaid debit card companies that their cards offer a significant cost savings over paper checks, employers should still carefully evaluate the actual fees associated with obtaining, loading and using the cards. Payoneer, for example, charges $9.95 for a new or replacement card and a $3 per month maintenance fee. Fees for loading the card with money range from $2 to $5 and ATM fees are $1.35 within the United States and $2.15 outside the country (the bank processing the ATM transaction may charge its own fee as well). Other cards, such as USA PayCard, Transcard and TFG Card have no (or very small) fees but offer different services than Payoneer, particularly in the international payroll arena.
Fees charged by card issuers and ATM operators are not only important for the employee using the debit card but for the employer as well; in fact, they are critical to the legality of the cards for processing payroll in California and other jurisdictions with similar laws. California Labor Code section 212 requires that employee payroll be negotiable without fee within the state. Therefore, in order to satisfy this requirement, employers choosing to issue payroll via prepaid cards will have to pay all fees associated with the use of the cards. Employers using the cards to pay employees in other states or foreign countries should consult local counsel in those jurisdictions to ensure that similar payroll requirements are satisfied prior to issuing the cards to employees.
More Legal Requirements

In addition to restricting fees for accessing paychecks, California Labor Code section 212 also requires that employers issue payroll in cash or check. Of course, at the employee's option, employers may directly deposit paychecks to an employee's bank account. The California Labor Commissioner has not yet issued any rulings pertaining to the treatment of prepaid debit cards for employee payroll, but because they are a form of instant electronic payment to an account in an employee's name, they are likely to be regarded similarly to direct deposit. Therefore, like direct deposit, employees must authorize the use of prepaid debit cards for payroll in writing.
Finally, the California Labor Code may also affect the way debit cards can be used in the context of final paychecks. When an employer terminates an employee, the employer must provide a final paycheck (including accrued vacation or PTO balances) immediately. Employees who voluntarily resign must receive their final paychecks within 72 hours of resignation, or on their last day of work, whichever is later. These requirements still apply to employees who have authorized direct deposit, and therefore would likely be applied to debit cards as well. Employers considering the use of debit cards within California or other jurisdictions requiring immediate payment of a final paycheck should therefore have in place plans for paying those employees immediately in the event of termination. Although the funds loaded onto prepaid debit cards are typically available within two hours, that two-hour delay would not satisfy California's requirement that employers issue final paychecks immediately.
Reimbursements and Vendors: Other Uses for Prepaid Debit Cards

Issuers of prepaid debit cards point out that they can create conveniences for employers and employees beyond monthly payroll. For example, employers may consider using prepaid debit cards for reimbursing employees for work-related expenses. In 2007, the California Supreme Court authorized employers to use any of three different methods for reimbursing employee expenses:
First, employees can submit actual expenditures, such as itemized receipts for work-related purchases.
Second, employees may report on the number of miles they drove for work and receive a per-mile reimbursement (without regard for actual receipts showing gas purchases, oil changes, etc.)
Finally, employers and employees may agree on a lump-sum reimbursement; in this method, the employee's work expenses are estimated in advance, and the employer provides regular payment covering that amount.
Each of these means of employee expense reimbursement may be served via a prepaid debit card. Particularly in foreign locales, where it may be challenging to obtain receipts or time-consuming to mail paper reports of work-related expenses, the prepaid debit card can give employees instant access to local currency. Using the "lump sum" approach, for example, employers and employees could agree on a regular amount necessary to cover expenses in advance. Employers would then load that amount onto the prepaid card each month, which the employee could then use to make purchases or get cash anywhere in the world.
Similarly, Payoneer has touted the benefits of its cards for paying vendors, particularly for products and services purchased online. Businesses that regularly pay outside vendors could provide those vendors with a prepaid card, and then upload funds whenever payment is due. As with payroll, the prepaid card will allow the businesses to avoid wire transfer fees, and Payoneer claims that they have overcome regulatory banking hurdles that otherwise make international payments difficult. Finally, conversion rates for transactions of less than $10,000 are almost always far more favorable than the foreign exchange rates of a bank, according to Payoneer.
Are Debit Cards for You?

Employers may consider offering prepaid debit cards for several reasons. First, and most traditionally, employees without bank accounts will find the debit cards a secure, convenient and inexpensive means of accessing payroll without the need to open a bank account or pay hefty check-cashing fees. For employers with international employees or vendors, the prepaid debit card may be a faster and less-expensive alternative to traditional funds exchange options, and may simplify the transfer of regular global payments. Finally, in some instances, employers may even find prepaid debit cards a cheaper, simpler and secure alternative to direct deposit - and possibly a widely adopted alternative in the near future.

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SLSTech

I know before I left Arizona - the State was close to making it that all employees & anyone that contracted with them, either had a Direct Deposit set up with them or they got a debit card. It was to save them big bucks in the printing of checks & bank charges.

Good luck passing the Gift Cards off as a business expense though...

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outlaw

Obama used this method of payment for his canvessers. Its dirty and underhanded.

BKFranks

I've heard of it. I did work for a big company and the employees had the option of a check mailed to their house, direct deposit, or a debit card. I think it's a way for their employees who are illegals with no I.D. to get their money without having a bank account and can't cash a check at a bank or check cashing place. There were a lot of illegals and a some of the guys who were illegal even told me they were so it's not just something I made up. There were even guys who were supposed to be deported for criminal stuff and either left and came back or just avoided the deportation orders.

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woodtradesman

You been hanging out in Santa Ana BK?

BKFranks

It's happening everywhere in Southern California.

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joasis

Nothing new about the idea....trucking has been doing it for a lot of years. Comdata is one of the versions. When I used to have over the road trucks, I paid my drivers via Comdata.....nothing about beating taxes, it was simply a method that was easily used.

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GoldenRuler

Sounds kinda odd to me, no way my guys would go for it.

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Mach

PA you either get unemployment to the debit card or direct deposit.

timtim2008

damn, you could use the transactions on the debit cards as tax write offs too