California Employers Unlikely To Adopt Prepaid Payroll Based On Recently Passed Bill

by Mercator Advisory Group 0

On June 3rd, the California Assembly passed Bill AB 51 –which applies a range of restrictions on Payroll Cards that will likely significantly limit adoption by employees.

While prepaid payroll cards are a more cost effective means for employers to deliver payroll versus checks, this reduced cost is typically insufficient to justify if the employer can’t eliminate checks. That is, the cost of adding yet another form of payment is harder to cost justify because there are no commensurate cost savings on current operations. In AB 51, the employer can only offer a prepaid payroll card if:

“The employer has obtained the employee’s voluntary written consent to receive wages by payroll card.

The employer has not made participation in the payroll card program a condition of hire or continued employment.

The employer has offered the employee, and the employee has declined, both the option of receiving his or her wages by direct deposit to a depository account of the employee’s choosing and the option of receiving payment by paper check.”

These restrictions under California AB 51 make it highly improbable that an employer could switch all employees to a payroll card. And so in a bill hyped as making payroll cards accessible, California has made them even less likely to be adopted by employers.

See AB 51 in its entirety here:

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