How can you electronically pay employees who do not have bank accounts? Payroll companies are offering debit cards filled with the employees cash that can be used to make purchases or withdraw cash from an ATM. It’s a kin to a virtual temporary bank account. Good idea!
It’s payday at a Wendy’s in Wichita, but the teens who flip the burgers aren’t lining up to get their checks from the manager’s office. In fact, they aren’t getting checks at all. Instead, sometime in the next few days they’ll simply visit a bank machine and withdraw part or all of their pay using a debit card.
It looks and works just like a standard debit card, but there’s a twist. Most of the employees using it don’t have bank accounts. The card draws on the payroll account of their employer, Wichita-based LDF Cos.
By offering this option to employees at its 44 franchise restaurants and five beer distributorships in three states, LDF has become one of the first small businesses to adopt the payroll system.
“We have a lot of employees who are young and ‘unbanked,’ and thus can’t get direct deposit,” explains Bill Goodlatte, LDF’s senior vice president of human resources. “This is a way for them to get their pay without paying exorbitant check-cashing fees, while allowing us to move toward a paperless office.”
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
They are a very good idea, and I used this service thru PayChex when it first became available.
CAVEAT: These debit cards normally charge a monthly fee and a per-transaction fee. If this is the ONLY option you offer your employees, you may run afoul of your state’s labor laws which may view some or all of the fees as an unauthorized payroll deduction.
Paul, that is interesting.
I was going to make the point that with this size of transaction, LDF is probably getting a nice % of each transaction, without the usual risk. Clever.