This month, Hawaii was the latest to allow employers to use prepaid cards to pay employee wages. The employer cannot mandate continued use of the card and must give the employee the option to receive wages via direct deposit or paper check. If the employee decides to switch from the pay card, the employer must honor this request within two pay cycles.
All fees associated with the pay card must be disclosed to the employee. The participation must be free to the employee, including the use of the first card. The card must, at a minimum, allow for three free withdrawals, including the full balance, a month. Fees cannot be assessed against employees that do not maintain a minimum balance. The funds on the card cannot expire; however, after six months of inactivity, the bank may close the account and send the funds to the employee via a different method.
Pay cards have become an effective tool to reduce outstanding uncashed payroll checks that lead to unclaimed property. Pay cards, when they have limited fees and restrictions, are extremely attractive to employees that may have difficulty accessing the traditional banking system.