However, to qualify, they have to meet certain requirements, including:

The on-demand pay provider must provide funds to an account of the employee's choice
The on-demand pay provider cannot charge fees for opening an account, delivery of funds, or use fees
Any prepaid card associated with the account must be issued on a major brand network and available for use at multiple merchants
There must be a free and reasonably accessible means to obtain cash from the account

Before anyone implements an on-demand pay solution, they must clearly explain to the employee that they:

Will not require the employee to pay any fees in connection with their account
Will not charge any overdraft fees
Will not engage in any debt collection activities
Will not directly or indirectly assess the credit risk of individual employees by reviewing credit reports or credit scores

How to ensure on-demand pay solutions are compliant

Whether you're an HR tech provider or an employer, before implementing an on-demand pay program, here is a summary of things you should look for in an on-demand pay provider:

Ensure the on-demand pay provider does not charge employees fees for wage advances
Ensure the on-demand pay provider is backed by a federally regulated (subject to federal regulations), not state-regulated (subject to changing state regulations), brand network
Ensure the on-demand pay provider uses a major brand network with access to multiple merchants and accessible (feeless) ways to get cash from the account
In addition, you should always check with a legal team to ensure that the on-demand pay provider follows all regulations.

On-demand pay is a next-level benefit where everyone wins. However, the on-demand pay provider must be thoroughly vetted to ensure compliance with federal and state laws.

Instant Insights /

4 things you need to know about on-demand pay compliance

More From HR Executive

Related Stories

Recommended For You