Payable Direct Deposit and Debit Cards: Avoiding pitfalls
December, 2008
As we approach the end of the year and as companies seek to reduce overhead costs, many have already adopted direct electronic deposit as the means to pay employees. However, paper pay stub statements reflecting wages earned and withholdings taken are still issued. Making the full transition to issuing these pay stub statements electronically, eliminating paper costs and waste, is a legally accepted option worth considering.
Additionally, other companies are also issuing debit cards as a method to pay wages. Caution should be taken if these cards are used to pay employees. Bank-imposed transaction fees run the risk of lowering an employee's take-home wage to an amount below the applicable minimum wage. Be aware, such debit arrangements might be illegal in your state.
Each state has different requirements for listing itemized deductions and for other information that must be included in pay stub statements, regardless if statements are in paper or electronic form. Bullivant offers customized analysis that suits your business needs for a given marketplace. For our major markets, we offer a brief summary of the available options:
In California, electronic pay stubs are permitted. E-stub use is allowed only if an employee can have access to a computer terminal and printer at the workplace, free of charge, to access pay stub information. Similar to electronic deposit, an employee may opt-out at any time. Listing pay stub information on a secure website is also an option, however like the paper records requirement in California, pay stub statement information must be available to an employee on the website for three years. Similarly, payroll debit cards are permissible only if there is no cost to an employee. It is rare for debit card companies to have no fees. If there are fees, the employer must pay them. Also, an employee must be issued materials showing ATM locations where they can access their funds.
In Nevada, E-stubs are permitted only if an employee can have access to their wage information within 10 days of a written request. Payroll debit cards are allowed if an employee gives written consent and can obtain immediate payment in full. An employee must be allowed at least one fee-free transaction per pay period so they can collect their wages without having to pay bank fees. For subsequent withdrawals incurring fees, those fees or charges must be prominently disclosed and subject to an employee's written consent. Also, ATM locations must be easily and readily accessible to an employee. Any fees or other charges must be prominently disclosed and subject to an employee's written consent. In addition, ATM locations must be easily and readily accessible to an employee.
In Oregon, e-Stubs are permitted only if an employee consents and has the ability to retain or print the itemized statement of deductions at the time of receipt. Payroll debit cards are allowed only if an employee consents and if the employee does not pay any additional fees in the county where the employee is paid.
In Washington, e-Stubs are permitted only if an employee is able to receive and print out pay statements on payday. An employer must provide the time and equipment allowing an employee to access and print his or her e-Stub statements. Payroll debit cards are permissible as long as there is no cost to the employee and the employee can withdraw their entire salary without paying any transaction or bank fees. Again, since the vast majority of debit cards carry fees for the use or balance review, the employer must pay such fees if it requires the card's use.
These four states are examples of the payroll variations and the many technicalities that can trip up employers across the country. If your business wishes to pursue these potentially money-saving payroll strategies, contact your legal counsel who can assist you in setting up a system that is compliant with applicable laws and regulations as well as a system that leads to greater efficiency.