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Employee paycard question California

edited November 2010 in General Payroll Topics
I've got a new employee who already has a paycard, and is requesting that we direct deposit her pay into the card account number. Our company does not offer pay cards, only direct deposit or check, so I'm not familiar with the CA regulations governing pay cards.

My question is, since EE is initiating the request to use a pay card and not the ER, what responsibility do we have with regard to the paycard fees, making sure she has the ability to make one free withdrawal per pay period, etc?

I was able to find this opinion letter but I did not find this specific point addressed.

Is there any further information out there on this point?


  • Why are you doing it at all if you don't otherwise offer pay cards?
  • Good question. That's what I'm trying to persuade my boss on, and she wants me to research this...
  • Give the employe the form that is to be completed for direct deposit and make sure they specify whether or not it is considered a checking or a savings.

    At my previous company we did not offer pay cards, but had one employee that had a fundable Visa card, we were able to set it up to be funded each pay as a checking account.
  • What will your bank/ACH processor charge to process this single unique transaction every pay?
  • im sorry I might be confused but the EE already has a paycard correct? if yes then it should be pretty easy the paycard company provides an ABA and DAA and the rest is like a direct deposit.
  • Unless your company is prepared to offer this pay option to everyone this is not a good idea. what are you going to do when this employee blabs and then someone else wants a pay card too?

    If your company policy does not allow for paycards - then stick to your guns and do the research necessary to perhaps offer them to everyone at a later date.
  • Sounds like it might be a debit card for an online bank account, not a paycard.

    I have an employee with the same thing - its just a regular direct deposit on our side and his bank handles the rest.

    If he says anything to other employees, they can just go to that bank's site and open their own account.

    It shouldn't create any additional work for you.

    Of course, I'm not in CA so ....
  • I would let the employee know that their options are live check, DD to checking, or DD to savings.

    Not always easy to say no, but as long as a pay card is not an option your comany offers, then I would say no, mostly because of the rules in California.

    To keep the boss and employee happy, you could get some pricing on what it would be in terms of money as well as time to offer pay cards to all employees. This way you aren't really saying a hard line no, you are saying that it is something that you currently don't offer but will look into.
  • Thank you all for your responses. Thankfully, my employer decided not to make an exception, and this employee will have the same choices as our other ees -- Direct Deposit or a check. *whew!*
  • Good. This is in the "no good deed goes unpunished" category. :twisted:
  • I've been involved with pay cards for many years and have implemented them at 3 different companies (in CA and elsewhere). Here's my two cents on this:

    --The beauty of a pay card is that it is a portable payment method which employees are encouraged to take with them to their next employer, or to use at their concurrent employer (if they have a second job); --The payment to a pay card goes through the exact same ACH file as for direct deposit. There's a routing/transit number and an account number, just like direct deposit. The accounts are set up to be sent to a "checking" account. --During the past 7 years or so, pay card companies have (finally) gotten wise to the restrictive regulations that exist in CA and elsewhere with regards to fees, etc. They now offer fee-free cards and many other free services to ensure that they are in sync with state regulations. The CA Dept. of Labor agrees that pay cards fully meet the definition of a payment method for their employees. I don't have access to it anymore, but I did read an opinion letter on this subject, and there's no objection to employers offering this method.

    I would definitely honor this payment method for a new employee and would enroll him in my direct deposit system, using his pay card in lieu of a bank account. There's no problem!
  • We've had a California employee use an existing re-chargeable card for a wage payment. He personally input the ABA and Acct number into our ESS system and called us afterward to tell us it worked. He did all of this himself and without our knowledge prior to the phone call or payment. I don't see how we can be held liable if an employee chooses to use this form of payment. Your case is really just one step removed from ours, so I don't think you'll have an issue. What if your employee used direct deposit on an ESS system to charge his card and you didn't know about it? He can still tell other employees what he did and they could follow suit, all without your knowledge.

    I think if any employee wants to use an existing card, let them. If you as a company don't want to sponsor a paycard program, you can retain that option. You can have both options.