Restaurant Payroll on Debit Cards?

Excerpted from Nation’s Restaurant News

Restaurant payroll debit cardPayroll debit cards, which have grown in use among restaurant operators over the past few years, had offered what looked like an excellent option to pay employees who didn’t want paper checks or have bank accounts in which to make direct deposits.

Excessive usage fees not employee-friendly

But the payment practice hit hurdles this summer when complaints of excessive fees led to some lawsuits and an investigation by New York’s attorney general.

“Helping workers access their hard-earned pay in a quick and reliable way is a good idea,” said Jason Gold, a senior fellow for financial services policy at the Washington-based Progressive Policy Institute, who studies the issue.

“Electronic debit cards could actually help many people acquire goods and services online, where they might not usually be able to shop due to lack of credit,” he said. “But when workers are forced to accept their wages in the form of debit cards and then get dinged for big fees, we have a problem.”

While it is unclear how widespread the use of payroll debit cards is among restaurant operators, several large restaurant companies, including Darden Restaurants Inc. and McDonald’s Corp., have entered publicized partnerships with payroll debit card providers.

Restaurants examine payroll options to fit employee needs

“Restaurants have faced a number of challenges in finding ways to do payroll that works best for their employees,” said Chris Tripoli, principal at A’la Carte Foodservice Consulting Group in Houston. “Many employees simply don’t have bank accounts in which to deposit wages, and the check cashing services can be expensive.”

A 2011 Federal Deposit Insurance Corp. survey found 8.2 percent of U.S. households — nearly 10 million households or about 17 million adults — have no bank accounts. The so-called “unbanked” must turn to alternative financial options, such as check cashing services, which can be expensive.

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