The end of the 'paper' paycheck

A new version of direct deposit for workers who don't have bank accounts is catching on with businesses small and large.



Where's my paycheck?

It's payday at a Wendy's (Charts) in Wichita, but the teens who flip the burgers aren't lining up to get their checks from the manager's office. In fact, they aren't getting checks at all. Instead, sometime in the next few days they'll simply visit a bank machine and withdraw part or all of their pay using a debit card.

It looks and works just like a standard debit card, but there's a twist. Most of the employees using it don't have bank accounts. The card draws on the payroll account of their employer, Wichita-based LDF Cos.

By offering this option to employees at its 44 franchise restaurants and five beer distributorships in three states, LDF has become one of the first small businesses to adopt the payroll system.

"We have a lot of employees who are young and 'unbanked,' and thus can't get direct deposit," explains Bill Goodlatte, LDF's senior vice president of human resources. "This is a way for them to get their pay without paying exorbitant check-cashing fees, while allowing us to move toward a paperless office."


Paycheck in a 'gift card'

Payroll debit cards are a variant of stored-value gift cards. The employer sets up a central payroll account and issues a card to each employee, electronically depositing into the account the amount owed each payday.

Employees can access their pay either by withdrawing cash at any ATM or by using the card to make purchases and get cash back. The company's payroll vendor tracks all the debits and credits for each paycard, sends out paper pay stubs and tax forms and provides a way for employees to check their balances either online or by phone.

Automatic Data Processing (Charts) (ADP), which handles payroll for one in six employees in the U.S., saw its paycard business triple from 2004 to 2005, says Gary Lott, general manager of ADP's TotalPay Card program.