If your staff is now working remotely due to COVID-19, here’s how to pay employees who normally receive paychecks and pay stubs in person.

Here's what you need to know:
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During COVID-19, it's important to issue payments to employees remotely
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Direct deposit is the top payment choice for most employees, but not all employees have access to a bank account
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Employers can put payments on a payroll card — which is a pre-funded, reloadable debit card
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Many states have enacted legislation to restrict payroll card fees
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When it comes to pay stubs, delivering them electronically is your best option, but check your state's laws
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Make sure to avoid infringing on your employees’ legal rights
Every business continuity plan should include alternative methods for disbursing employees’ pay in the event of an emergency or disaster. Currently, we have a global disaster — COVID-19 — and hopefully, you have a solid employee-payment plan.
As a small employer, you likely pay your employees via direct deposit, since most Americans are paid as such. In 2016, the National Automated Clearing House Association reported that 82% of U.S. workers are paid by direct deposit through Automated Clearing House, jumping from 74% in 2011. The upward trend held fast in 2019, with NACHA announcing a 6% increase in payroll direct deposits and other payments to consumers.
These numbers highlight not just the popularity of electronic payments but also the fact that not every employee has direct deposit. Prior to COVID-19, lack of direct deposit may not have been an issue for the employer or the employee. Now, however, direct deposit and other alternative payment methods are basically necessities.
What’s the big deal?
To understand the need for alternative payment options, you must first know the effects of COVID-19 on paycheck delivery.
Onsite employees who receive paper checks are often handed their paychecks at the workplace. This method does nothing to minimize the spread of COVID-19, and in fact, only encourages it.
If these onsite employees are moved to a remote work setting, their paychecks are likely mailed to their home address — which isn’t the most dependable vehicle, particularly during a pandemic.
What are the alternatives?
Direct deposit
Direct deposit is the top payment choice for most employees, but not all employees have it.
As stated, direct deposit is the top payment choice for most employees, but not all employees have it.
Under federal law, you can make direct deposit mandatory, provided the employee is able to pick the bank they want their wages to be deposited into. In some states, however, employers cannot mandate direct deposit.
If you prefer, you can simply encourage all employees to sign up. In this case, you’ll need to demonstrate the benefits of direct deposit, such as:
- Convenience: Employees will receive their paychecks in their bank accounts on payday, without having to physically visit the bank. No more waiting for the mail person to arrive.
- Safety: Eliminates the probability of lost, damaged, or stolen checks, and reduces the spread of infectious disease.
- Free: Employees pay nothing to have their wages direct deposited into their bank account or to access the funds.
- Reliable: According to the U.S. Office of Personnel Management, direct deposit is more reliable than paper checks.
As the employer, you stand to gain as well, since direct deposit:
- Eliminates check printing expenses, including costs associated with reissuing lost, damaged, or stolen checks
- Reduces bank service charges, payroll fraud, and payroll administration costs
- Increases productivity, as employees don’t have to take time off to visit the bank
Payroll cards
In a perfect world, all of your employees would heed your advice and sign up for direct deposit. But you have to consider that for direct deposit to happen, the employee must provide you with their bank account information, and some employees don’t have access to a bank account or can’t get one. For this reason, payroll cards are on the rise.
Whereas direct deposit electronically transfers wages from the employer’s bank account to the employee’s checking or savings account, a payroll card is a pre-funded, reloadable debit card.
Payroll cards work similar to regular debit cards in that the employee can retrieve their net wages via an ATM, make point-of-sale purchases, pay bills online, and transfer money to friends or family. They also operate similarly to direct deposit and have many of the same benefits.
However, unlike direct deposit, payroll cards are somewhat controversial, mainly because of their fees. Depending on the vendor, employees may be charged a fee to:
- Access their wages from the ATM
- Make purchases
- Check their account balance at the ATM
- Replace a lost or stolen card
- Transfer funds
For direct deposit to happen, the employee must provide you with their bank account information, and some employees don’t have access to a bank account or can’t get one.
Laws to consider
To prevent payroll card vendors from taking advantage of unbanked employees, many states have enacted legislation to restrict payroll card fees.
Despite the controversy, payroll cards are becoming more prominent and have gained credibility among state legislators.
According to the American Payroll Association, “Payroll cards are now widely recognized to be a lawful method of wage payment.” Further, over half of states authorize the use of payroll cards.
State payroll card laws may cover:
- Circumstances under which payroll cards are an acceptable form of payment
- Fee restrictions
- Employee consent
- Free withdrawals each pay period
- Disclosure
- Access to withdrawals
- Insurance of the payroll card account
- Allowing employees to choose a different payment method
“Payroll cards are now widely recognized to be a lawful method of wage payment.”
Federally speaking, there are 2 laws to consider:
- The Electronic Funds Transfer Act and Regulation E, which prohibit employers from forcing employees to receive their wages via payroll card
- The Fair Labor Standards Act (FLSA), which governs federal minimum wage rules. You’ll need to ensure your employees’ payroll card fees don’t trigger FLSA violations
Potential drawbacks aside, payroll cards offer many upsides for employers and employees and can be especially valuable during pandemics.
Mobile payroll solutions
COVID-19 has emphasized the need for mobile-friendly payroll systems that lower dependency on the payroll team and boosts employee autonomy.
Commonly, mobile payroll solutions let employees:
- Clock in and out
- Check their work schedule
- View their leave balance
- Request time off
- Review benefit plan information
- Manage benefit elections
- Retrieve pay statements and W-2 data
- Make basic changes to their employee record
- Review their payroll card balance
Electronic pay stubs
Now that your employees are working remotely, you can no longer hand-deliver their pay stubs, thereby making electronic delivery your best option.
Although federal law does not require pay stubs, many states do. Most of these states allow written, printed, or electronic pay stubs (such as via email or an online portal). A few states require employers to make electronic pay stubs voluntary, meaning employers cannot force their employees to receive pay stubs electronically.
What about cash payments?
Paying your employees in cold hard cash is legal as long as you adhere to applicable employment laws. That said, making cash payments is not only a COVID-19 health risk but also impractical from a remote work perspective. It’s also difficult to track cash payments to employees. Plus, cash payments have a habit of landing on the IRS’ radar.
What if my employees don’t want electronic pay options?
This is a real possibility, as some employees may be skeptical of receiving their wages and pay stubs electronically. If legally allowed, you can make direct deposit mandatory, but be sure to consider potential consequences, such as adverse impact on morale. Or, you could try to convince employees by explaining the value of electronic payments and pay stubs, especially during a pandemic. But tread carefully to avoid infringing on your employees’ legal rights.