I Owe My Soul To The Company Store

by Matthew Stollak on Monday, July 1, 2013

Those were the days:

Today, the lyric is now "St Peter don't you call me, cause I ain't free, they sold my soul for a kickback on the fee:"

A growing number of American workers are confronting a frustrating predicament on payday: to get their wages, they must first pay a fee.

For these largely hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers. Employees can use these cards, which work like debit cards, at an A.T.M. to withdraw their pay.

But in the overwhelming majority of cases, using the card involves a fee. And those fees can quickly add up: one provider, for example, charges $1.75 to make a withdrawal from most A.T.M.’s, $2.95 for a paper statement and $6 to replace a card. Some users even have to pay $7 inactivity fees for not using their cards.

These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators.

Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald’s in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.

Many employees say they have no choice but to use the cards: some companies no longer offer common payroll options like ordinary checks or direct deposit.

At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.

“We hear virtually every week from employees who never knew there were other options, and employers certainly don’t disabuse workers of that idea,” said Deyanira Del Rio, an associate director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

Obviously workers have been taking advantage of free payroll overhead for way too long.  Why should the employer bear the brunt of paying for the ink and paper needed to produce checks?

C'mon HR people...really?  With median weekly wages now less than a bottle of Cristal champagne, a fee laden card is the last thing employees need.

  • Help employees find credit unions where there is direct deposit and free checking
  • Offer financial literacy classes to employees

Advocating this approach for your business is lazy HR and it should be illegal.  Employees should not have to pay to get the money they rightly earned.

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