Looking for new ways to electronically pay employees? Learn about payroll cards

Jan 25, 2022

Traditionally, local governments have had two options to pay their employees: by direct deposit or by paper check. But these options may not work well for everyone.

Not all employees have bank accounts, which makes direct deposit impossible. For these employees, cashing payroll checks can be difficult, inconvenient and costly. Checks are expensive for local governments, too, and they create additional work if employees lose them or don't cash them for extended periods of time.

We first introduced the idea of payroll cards in our Payroll Guide in September 2021. Using this option, governments can load payroll payments onto payment debit cards, and employees can withdraw the funds at an ATM, transfer the funds to a bank account, or use the debit card to purchase goods or services.

If you are considering offering payroll cards as an option for employees, here's some information on how a payroll card program might work.

The basics of payroll cards

A payroll card program requires contracting with a service provider. The service provider can mail the cards directly to employees, who then own and maintain possession of the payroll cards. The government has the account number associated with the card in order to load payroll each pay period, but it cannot view balances or activity other than confirming payroll loaded onto the card.

It's best to gauge employee interest before you take steps to find a service provider.

Finding a service provider

To find a service provider and get the best terms possible for your employees, you might request proposals in conjunction with your government's other banking needs.

Service providers usually make their money on the interchange—when employees purchase from merchants—and by charging some cardholder fees. Help your employees by:

  • Negotiating the least amount of cardholder fees possible. Employees should be able to check their balance and make some withdraws and transfers without incurring any fees.
  • Making sure in-network ATM locations are close enough to employees' work locations so they can conveniently use them
  • Avoiding service providers that impose restrictions limiting employees from withdrawing or transferring their entire balance

You should communicate information about cardholder fees to employees yourself because they might not read the disclosure the service provider sent. This will help ensure that any fees or limitations do not surprise your employees.

Of course, you want to be sure the service provider meets federal and state requirements. Currently, there are no specific statutes in Washington for payroll cards, but that may change in the future. You would need to monitor for any evolving legislation.

Effects on control systems

It does take some administrative time to issue the cards, circle back with employees and answer their questions.

Since payroll cards work similarly to a direct deposit program, the same internal control processes should apply. You should limit access to account numbers, just like you would with direct deposit. Additionally, you would need to keep documentation supporting how employees chose to be paid, such as using a standard form, just as you would for other payment options.

If an employee loses the card, the service provider can replace it. It may not affect the account number you are using for deposit purposes, but you should check with the service provider.


Would you like to explore the use of payroll cards or other options to improve your payroll processes? Not sure where to start? Consider these resources:

  • Washington state began offering payroll cards as an option for state agencies about 10 years ago. You can find some information about the program here.

How to reach us for more assistance

Do you have additional questions about payroll cards or other payroll-related internal control practices? We would be happy to help. If you aren't sure about your question or would like to talk with someone about a payroll-related project, contact one of the Center for Government Innovation's financial management specialists at Center@sao.wa.gov.

If you have specific technical accounting questions, submit them to our HelpDesk in the client portal.