{"id":7610,"date":"2020-09-02T15:12:00","date_gmt":"2020-09-02T15:12:00","guid":{"rendered":"https:\/\/www.dailypay.com\/?p=7610"},"modified":"2022-01-28T12:08:56","modified_gmt":"2022-01-28T17:08:56","slug":"understanding-how-on-demand-pay-providers-work-with-paycards","status":"publish","type":"post","link":"https:\/\/www.dailypay.com\/resource-center\/blog\/understanding-how-on-demand-pay-providers-work-with-paycards\/","title":{"rendered":"Understanding How On-Demand Pay Providers Work With Paycards"},"content":{"rendered":"\n

As the on-demand pay space continues to grow and evolve, it becomes easier to identify common misconceptions about this technology. One of the biggest misconceptions is that on-demand pay solutions always require employees to be paid with paycards. <\/p>\n\n\n\n

Paycards could be a convenient alternative to direct deposit for both banked and unbanked employees. However, the vast majority of U.S. employees have bank accounts and want options to access their earned wages anytime, anywhere without needing a paycard.  <\/p>\n\n\n\n

While some on-demand pay providers still build their entire business models around paycards, others have much more flexible models. It is important to understand which paycard model a provider uses when selecting the best fit for your company.<\/p>\n\n\n\n

There are three models through which on-demand pay providers can utilize payroll cards:<\/p>\n\n\n\n

–The<\/strong> employer-funded model<\/strong>, <\/strong>which requires employers to pre-fund employee transfers from their own balance sheet and typically requires employees to be paid through paycards to receive the benefit. Instant Financial, Flexwage and Rapid! use this model.<\/p>\n\n\n\n

–The<\/strong> hybrid model<\/strong>, <\/strong>which may incentivize employees to be paid via paycards but does not require employers to pre-fund those transactions.<\/p>\n\n\n\n

–The open access model<\/strong>, does not require pre-funding by employers and allows employees to be paid in whatever way they choose, whether that is via paycard, a bank account or a debit card. This is the model DailyPay uses.<\/p>\n\n\n\n

The open access model is usually the least burdensome and the most compliant for the employer, as it doesn\u2019t require pre-funding transactions, which can be both a financial and administrative strain, and does not trigger constructive receipt. It also doesn\u2019t require any changes to how their employees are paid, which eliminates stress for both employees and employers. The open access model also provides the most room for employee flexibility, as they can access this valuable benefit through whatever account is the most convenient for them.<\/p>\n\n\n\n

Many states have additional payroll compliance requirements<\/a> around the use of paycards, such as mandating that employees who are paid through this method have access to 100% of their pay, down to the penny, at all times. <\/p>\n\n\n\n

Because paycards involve a payroll card program vendor, verify that the vendor complies with the following rules:<\/p>\n\n\n\n