America's employers have lots of different ways to pay gig workers. They can pay cash, write checks, utilize direct deposit, or even issue payroll cards. Direct deposit is by far the most popular method at the current time, but there are some rumblings within the payroll universe that suggest gig workers may eventually usher in the era of the payroll card.
For those unfamiliar with payroll cards, think of them as similar to prepaid debit cards. Where a consumer may purchase a prepaid debit card and then load it with cash as needed, a payroll card is loaded every time the employer pays an employee. The card can be used just like a standard debit card to buy groceries, purchase gas, pay bills, etc.
Payroll cards have not really taken off with either online payroll services or employers for a number of reasons. Chief among them is the high costs normally associated with the cards. There are even states that have pushed to ban payroll cards unless and until card providers eliminate the fees that go with them. Otherwise, the states maintain, employees paid by way of plastic cards are not getting the full value of their wages.
As the states and the payroll industry try to work out their differences, there are valid reasons to believe that younger gig workers will be demanding payroll cards in greater numbers at some point down the road. Some of those reasons are explained below.
Single Account Convenience
Gig workers, by definition, do not normally work exclusively for a single employer for years at a time, let alone months. Rather, they cobble together multiple gigs that fill their schedules and keep the income rolling in. But let's say a worker is juggling two or three clients simultaneously? Each one represents a part-time arrangement that results in a separate form of payment at the end of each pay period.
If that gig worker could get all three clients to use the same payroll card, he or she would enjoy the convenience of a single payroll account. There would not be separate direct deposits to worry about or multiple checks to cash. Money would be loaded on the card at the end of each pay cycle and spent as the worker saw fit. The worker would only need to reconcile his own accounts at the end of the month.
Removing the Bank
Checking accounts are standard fare for older workers who grew up under traditional banking rules. Younger workers are not necessarily loyal to their banks in the same way. In fact, there are some workers who would rather not do business with banks altogether. Payroll cards make it possible for younger gig workers to take the bank out of the equation. They see payroll cards as a digital version of cash that limits the payment transaction to employer and employee only.
Digitization of Payments
Finally, the rise of the gig economy most affects millennial workers who do not want to be constrained by a single employer. The same workers are very attuned to technology in every aspect of their lives. Interestingly, many of them see the traditional banking system as a legacy system that should be replaced by digitization. Payroll cards represent that digitization.
Online payroll services are increasingly adding payroll cards to their options for paying employees. The cards are not yet a major disruptor in weekly payments, but we can easily imagine the day when the gig economy looks to payroll cards as the primary way of paying gig workers. Payroll cards fit perfectly into the gig mindset.