How to pay workers who don't want direct deposit
September 15, 2024 1:24 PM Subscribe
What's a good paycheck solution for a restaurant business whose employees are skeptical of bank accounts but paying significant check cashing fees (on the order of 9%) and have remittance needs?
A friend of mine owns a small chain of restaurants with more than 100 employees. Most of the common solutions put the business owners' needs and costs first, but he wants to do better than that.
Many of his employees are immigrants who are skeptical of bank accounts, but they also send significant amounts of support to family abroad. Sadly, many fear that they'll be deported or otherwise terrorized if Trump is elected and are also afraid to use local banks, so instead they pay exorbitant fees to check cashers. And they'd rather not change systems! But they're losing a lot of money to check cashing, and he wants to fix this.
What's the best and fairest way you've seen this handled?
Some possibilities:
1. Cash payments (Basically, cut out the middleman, cash your own checks for free. If you've seen this, how does it work?)
2. Debit cards/refillable cash cards (isn't this kind of a bank account?)
3. Some app? Venmo/Cash App/etc. (many use these apps already--but isn't this ALSO kind of a bank account?)
4. Form a relationship with a local bank that is better able to create trust (are there any that you know are good at this?)
A friend of mine owns a small chain of restaurants with more than 100 employees. Most of the common solutions put the business owners' needs and costs first, but he wants to do better than that.
Many of his employees are immigrants who are skeptical of bank accounts, but they also send significant amounts of support to family abroad. Sadly, many fear that they'll be deported or otherwise terrorized if Trump is elected and are also afraid to use local banks, so instead they pay exorbitant fees to check cashers. And they'd rather not change systems! But they're losing a lot of money to check cashing, and he wants to fix this.
What's the best and fairest way you've seen this handled?
Some possibilities:
1. Cash payments (Basically, cut out the middleman, cash your own checks for free. If you've seen this, how does it work?)
2. Debit cards/refillable cash cards (isn't this kind of a bank account?)
3. Some app? Venmo/Cash App/etc. (many use these apps already--but isn't this ALSO kind of a bank account?)
4. Form a relationship with a local bank that is better able to create trust (are there any that you know are good at this?)
[Assuming USA/Canada] Are the employees already in one or more local credit unions' field of membership? Or, would your friend consider partnering with a local credit union to bring their employees into their field of membership?
posted by zaixfeep at 1:40 PM on September 15 [3 favorites]
posted by zaixfeep at 1:40 PM on September 15 [3 favorites]
Response by poster: This is the US, specifically the DC, Maryland, Virginia region. Apparently they tried a credit union partnership, and it didn't shift behavior. I've seen the cash cards work in construction/trades but maybe because the pay is higher?
This situation is apparently pretty standard in the restaurant industry, so I'm mostly just looking for things that are novel (especially now that everyone has a smart phone) or that particularly fairness-oriented folks have done that works better.
posted by anotherpanacea at 1:55 PM on September 15
This situation is apparently pretty standard in the restaurant industry, so I'm mostly just looking for things that are novel (especially now that everyone has a smart phone) or that particularly fairness-oriented folks have done that works better.
posted by anotherpanacea at 1:55 PM on September 15
Best answer: I suspect a credit union would look a lot like a bank to them.
This is a tough one. My wife does payroll for a small home healthcare company, and there are employees who don’t have bank accounts. In their case, the employees use things like paper checks or refillable cards (which would seem to need a bank account)
Would an online-only service like Chime work? Yeah, it’s a bank, but maybe it’s lack of physical presence might ease their fears? It’s at least on online/mobile.
There is always cash, of course. But then the employer has to keep stacks of bills onsite, which is potentially problematic.
posted by Thorzdad at 1:59 PM on September 15 [1 favorite]
This is a tough one. My wife does payroll for a small home healthcare company, and there are employees who don’t have bank accounts. In their case, the employees use things like paper checks or refillable cards (which would seem to need a bank account)
Would an online-only service like Chime work? Yeah, it’s a bank, but maybe it’s lack of physical presence might ease their fears? It’s at least on online/mobile.
There is always cash, of course. But then the employer has to keep stacks of bills onsite, which is potentially problematic.
posted by Thorzdad at 1:59 PM on September 15 [1 favorite]
It seems like the smallest lift is seeing whether the bank that issues the checks is willing to cash them for free/for a smaller fee than the check cashing places. As I understand it, banks aren't obliged to cash checks drawn on their accounts for non-customers, but many will.
Sometimes people are unbanked because they're simply ill-informed, but often when people are doing things that seem impractical/costly/not in their best interests, they've either encountered insurmountable systemic barriers or they're doing the thing for good reasons that aren't apparent to people outside their community or not familiar with their situation. In other words, the impulse is commendable, but your friend isn't going to change their employees' behaviour, they can only offer options -- suggest cashing the check at the bank doing payroll, ask if people would be interested in prepaid debit cards, etc. If their unbanked employees share a common background, an organization in that community may also be a good resource (both for ideas and understanding why people are doing what they're doing).
posted by hoyland at 2:13 PM on September 15 [10 favorites]
Sometimes people are unbanked because they're simply ill-informed, but often when people are doing things that seem impractical/costly/not in their best interests, they've either encountered insurmountable systemic barriers or they're doing the thing for good reasons that aren't apparent to people outside their community or not familiar with their situation. In other words, the impulse is commendable, but your friend isn't going to change their employees' behaviour, they can only offer options -- suggest cashing the check at the bank doing payroll, ask if people would be interested in prepaid debit cards, etc. If their unbanked employees share a common background, an organization in that community may also be a good resource (both for ideas and understanding why people are doing what they're doing).
posted by hoyland at 2:13 PM on September 15 [10 favorites]
Best answer: I also want to add that their fears are not unfounded. I believe it was US Bank who advertised that they'd accept Mexican consular IDs to open accounts and then turned around and cooperated with ICE. Even if your immigration status is rock solid, a lot of people never get over the fear of their family being broken up (this is literally why my mother is a US citizen).
posted by hoyland at 2:16 PM on September 15 [13 favorites]
posted by hoyland at 2:16 PM on September 15 [13 favorites]
Response by poster: (Very much not doubting their fears! But maybe some things, like Chime, are credibly safer on this score?)
posted by anotherpanacea at 2:19 PM on September 15
posted by anotherpanacea at 2:19 PM on September 15
It seems like the smallest lift is seeing whether the bank that issues the checks is willing to cash them for free/for a smaller fee than the check cashing places. As I understand it, banks aren't obliged to cash checks drawn on their accounts for non-customers, but many will.
I 2nd this. I'm not fully up on the current situation, but the last time I had to deal with this (30+ yrs ago) I could take checks to the issuing bank and they would cash them no-charge. Of course that requires presenting valid ID, which may get back to the original hurdle of distrusting banks...
posted by Pedantzilla at 3:01 PM on September 15 [1 favorite]
I 2nd this. I'm not fully up on the current situation, but the last time I had to deal with this (30+ yrs ago) I could take checks to the issuing bank and they would cash them no-charge. Of course that requires presenting valid ID, which may get back to the original hurdle of distrusting banks...
posted by Pedantzilla at 3:01 PM on September 15 [1 favorite]
Although it does have the disadvantage of having large amounts of cash on hand, I'm sure many of the employees would be very grateful to have you pay them by check, and then be willing to sign the check back to you for cash. If they would be comfortable having and using a prepaid Visa card, you might be able to have them stipulate ahead of time that they will take x amount on a prepaid card and the rest in cash. That way you wouldn't have so much cash in pocket and neither would they.
Or perhaps you might talk to your bank about giving your employees a discount on cashing checks because they are the issuing bank. Doesn't hurt to ask.
posted by BlueHorse at 3:14 PM on September 15 [1 favorite]
Or perhaps you might talk to your bank about giving your employees a discount on cashing checks because they are the issuing bank. Doesn't hurt to ask.
posted by BlueHorse at 3:14 PM on September 15 [1 favorite]
Best answer: Chime is not a bank - they call themselves a financial technology company. They partner with banks, so the same fears still apply. Nerd Wallet has some notes about issues they've had with the CFPB.
If I were in this situation, I'd find a local non-profit group for either immigrants or people experiencing poverty and see if they have any suggestions. The bank the checks are drawn on would be ideal if they are open to it. Giving the option to pay out tips in cash would also be good.
posted by soelo at 3:55 PM on September 15 [6 favorites]
If I were in this situation, I'd find a local non-profit group for either immigrants or people experiencing poverty and see if they have any suggestions. The bank the checks are drawn on would be ideal if they are open to it. Giving the option to pay out tips in cash would also be good.
posted by soelo at 3:55 PM on September 15 [6 favorites]
If you are considering cash payment, I strongly recommend that your friend consult with their businesses lawyer and CPA to see if they may run into issues surrounding compliance and withholding in the DC metro area. There may be a need for increased record keeping and internal controls over cash to avoid being susceptible to audit or running afoul of payroll requirements.
I second the suggestion that your friend also talk to a non-profit like CASA to see if they have any thoughts.
posted by donut_princess at 5:29 PM on September 15 [4 favorites]
I second the suggestion that your friend also talk to a non-profit like CASA to see if they have any thoughts.
posted by donut_princess at 5:29 PM on September 15 [4 favorites]
Best answer: Small local bank employee here. At my bank, we will cash a check drawn on our bank for anyone with valid current ID for free. If it is more than $2000, we require them to fill out a form and give us some more information like address and social security number, but if it is less than that we don't ask for any of that. YMMV by bank, I know that Bank of America is especially not good about doing this (I think I've heard they want your fingerprints and $8?)
A good number of local businesses who bank with us have employees come to us to cash their paychecks. One employer sometimes has her workers endorse their paychecks and sign them over to her, so she can come cash them and then give each worker their cash. So the worker gets cash but there's a record of a paycheck being issued...but that's probably not something most banks will do or look favorably on.
posted by needs more cowbell at 5:50 PM on September 15 [2 favorites]
A good number of local businesses who bank with us have employees come to us to cash their paychecks. One employer sometimes has her workers endorse their paychecks and sign them over to her, so she can come cash them and then give each worker their cash. So the worker gets cash but there's a record of a paycheck being issued...but that's probably not something most banks will do or look favorably on.
posted by needs more cowbell at 5:50 PM on September 15 [2 favorites]
If he hasn’t already, I’d start by seeing if a few of those employees would talk to him about their concerns, what options would or wouldn’t help, whether there’s something they’ve heard of other restaurants doing that would be good for them, etc. No point in putting a lot of effort into e.g. shopping around for a good deal on the bank card solution if he’s going to find out that it wouldn’t help with the specific concerns his employees have. If the employees themselves aren’t comfortable with that conversation, or maybe even if they are, then that conversation with a relevant experienced nonprofit would be my next step.
posted by Stacey at 6:04 PM on September 15 [3 favorites]
posted by Stacey at 6:04 PM on September 15 [3 favorites]
I know I know, but give them a 9% raise? People with distrust of the banking system due to facing continual immigrantism probably don't give a toss about the difference between a bank and a credit union. Large building, security guard, white people, expectations of English as a first language... Nope right out the door.
Either do the labor to pay them cash or just pay them extra to cover check cash in. (maybe just pay the check cashing % in cash?)
posted by chasles at 6:20 PM on September 15 [3 favorites]
Either do the labor to pay them cash or just pay them extra to cover check cash in. (maybe just pay the check cashing % in cash?)
posted by chasles at 6:20 PM on September 15 [3 favorites]
Check cashing place may have a payroll option where they act as a direct deposit bank and the employee presents company ID to get cash. Likely a smaller fee and the employer could pay it.
posted by Sophont at 11:05 PM on September 15 [1 favorite]
posted by Sophont at 11:05 PM on September 15 [1 favorite]
Small local bank employee here. At my bank, we will cash a check drawn on our bank for anyone with valid current ID for free
This is becoming less and less common; my wife used to go to her employer's bank to cash her paycheck and they recently said that they won't cash them for her unless she also has an account there. She pushed back as far as a manager and got a shrug.
posted by AzraelBrown at 7:17 AM on September 16
This is becoming less and less common; my wife used to go to her employer's bank to cash her paycheck and they recently said that they won't cash them for her unless she also has an account there. She pushed back as far as a manager and got a shrug.
posted by AzraelBrown at 7:17 AM on September 16
Best answer: More banks are reluctant to cash checks for non-customers because of the "know your customer" laws that are more stringently enforced these days. It started as a way to curb money laundering but has expanded so much that banks have to have confirmed ID for virtually any transaction they do (think OFAC, FinCEN, and other lists of restricted individuals/countries). The best workaround I've seen is something like CHIME, but even that requires some verification of identity when signing up. I think your best bet is to work with a local-to-restaurant immigration support group to find out if there are already solutions that work for non-documented workers, or if it's really that they just have to use the check cashing places. Just a note that the check cashing places are also coming under pressure and regulation to have "know your customer" actions in place and may not be a refuge for non-documented individuals in the future.
It's all part of the apparatus of ensuring that the USG knows where money is flowing, whether for terrorism, anti-corruption, or sanctions reasons, or simply because it's the easiest way to enact surveillance on individuals throughout the country. None of these laws are neutral when it comes to population surveillance. Living in a cash economy has become significantly more difficult as the USG imposes these laws on smaller and smaller institutions. And just to be clear, check cashing companies are mostly vile and usurious and need as much regulation as possible, but this particular regulation hits undocumented workers very hard.
posted by drossdragon at 1:04 PM on September 16 [2 favorites]
It's all part of the apparatus of ensuring that the USG knows where money is flowing, whether for terrorism, anti-corruption, or sanctions reasons, or simply because it's the easiest way to enact surveillance on individuals throughout the country. None of these laws are neutral when it comes to population surveillance. Living in a cash economy has become significantly more difficult as the USG imposes these laws on smaller and smaller institutions. And just to be clear, check cashing companies are mostly vile and usurious and need as much regulation as possible, but this particular regulation hits undocumented workers very hard.
posted by drossdragon at 1:04 PM on September 16 [2 favorites]
Response by poster: Thanks everyone. This is frustrating but it does seem like it’s really KYC and well-founded fears, rather than a merely technical problem that can be solved by shopping around.
I think Bank of America might be part of the issue, though. For deposits the business needs a bank with tons of local branches within walking distance, which really ought to be perfect for check cashing too! But they charge an $8 fee if you don’t have an account.
posted by anotherpanacea at 1:41 AM on September 17
I think Bank of America might be part of the issue, though. For deposits the business needs a bank with tons of local branches within walking distance, which really ought to be perfect for check cashing too! But they charge an $8 fee if you don’t have an account.
posted by anotherpanacea at 1:41 AM on September 17
Best answer: I imagine Bank of America is absolutely part of the problem. My coworker in banking who worked there for 28 years avoids it. My customers who are documented, white, US citizens avoid trying to cash checks there (which we sometimes suggest if a check drawn on BofA is more than we are able to cash for them and they want funds right away instead of depositing it.) People come back to us making fun of/complaining about what a hassle it is and mentioning the fingerprint thing being creepy. If I had anxiety about being an immigrant I'd definitely avoid it. If trying to cash a check at BofA had been my only experience with a US Bank I'd maybe avoid US Banks, too.
In comparison to BofA, I once called a regional (bigger than mine, not as big as BofA) bank to ask if someone could cash his paycheck there because it was drawn on them and they said yes. This person--a relative of a customer--had an out of state ID and a passport from another country and no social security number. His relative reported back that he was able to cash his paycheck there.
FWIW when we cash checks for non-customers we run them through a watchlist for the entities mentioned by drossdragon above. And we write down their ID information on the check. We will, with those things, cash checks for people that we would not/could not open accounts for. But overall it does make sense that this is more of a complex, partly social problem not necessarily easily solved.
posted by needs more cowbell at 2:28 AM on September 17
In comparison to BofA, I once called a regional (bigger than mine, not as big as BofA) bank to ask if someone could cash his paycheck there because it was drawn on them and they said yes. This person--a relative of a customer--had an out of state ID and a passport from another country and no social security number. His relative reported back that he was able to cash his paycheck there.
FWIW when we cash checks for non-customers we run them through a watchlist for the entities mentioned by drossdragon above. And we write down their ID information on the check. We will, with those things, cash checks for people that we would not/could not open accounts for. But overall it does make sense that this is more of a complex, partly social problem not necessarily easily solved.
posted by needs more cowbell at 2:28 AM on September 17
Response by poster: I haven't heard about the fingerprint, and couldn't verify online, but that seems like a strong disincentive. (The $8 is public.)
Does anyone know of comparably-located banks? Truist is maybe the other most super common bank in the DMV region, but apparently they serve more "drive up" customers and fewer walkers. I think the walkable deposits thing is pretty much a business necessity, and BoA may just be the only bank locally that occupies this niche. (For instance, I spent some time looking at Andrews Federal Credit Union which has extended its membership pretty broadly.)
posted by anotherpanacea at 8:10 AM on September 17
Does anyone know of comparably-located banks? Truist is maybe the other most super common bank in the DMV region, but apparently they serve more "drive up" customers and fewer walkers. I think the walkable deposits thing is pretty much a business necessity, and BoA may just be the only bank locally that occupies this niche. (For instance, I spent some time looking at Andrews Federal Credit Union which has extended its membership pretty broadly.)
posted by anotherpanacea at 8:10 AM on September 17
They don't necessarily need to use the same bank for making cash & check deposits and for issuing payroll checks.
They can make cash & check deposits at Bank of America or whatever and have payroll checks issued from an account at a different bank which has more favorable check cashing policies for non-customers. Obviously this involves money being drawn from the bank where deposits are made into the second bank, but that can likely be done without a bank visit (and would be orchestrated by someone who does the books/runs payroll--I'm assuming the need for banks within walking distance is because restaurant staff need to make regular deposits of checks or cash.)
In the case I can think of offhand, a business deposits checks and cash with us because we're close by, but has a third-party payroll company. Payroll company issues paychecks from a different bank. The business has an account with us called "payroll" and the third-party payroll company draws money from it for the paychecks and issues them from the payroll company's associated bank. But we don't know anything about how he does payroll.
posted by needs more cowbell at 3:50 AM on September 19
They can make cash & check deposits at Bank of America or whatever and have payroll checks issued from an account at a different bank which has more favorable check cashing policies for non-customers. Obviously this involves money being drawn from the bank where deposits are made into the second bank, but that can likely be done without a bank visit (and would be orchestrated by someone who does the books/runs payroll--I'm assuming the need for banks within walking distance is because restaurant staff need to make regular deposits of checks or cash.)
In the case I can think of offhand, a business deposits checks and cash with us because we're close by, but has a third-party payroll company. Payroll company issues paychecks from a different bank. The business has an account with us called "payroll" and the third-party payroll company draws money from it for the paychecks and issues them from the payroll company's associated bank. But we don't know anything about how he does payroll.
posted by needs more cowbell at 3:50 AM on September 19
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The issue is it’s still like a bank. Anything that handles your money is going to be, in some sense. But the reality is, if they are getting a paycheck with taxes taken out then the government already is aware of their existence and the bank isn’t going to make it worse. Plus banks have other benefits like insured deposits and not tying your money to a single card that can get lost.
Maybe they’d be more comfortable with a credit union? One who may be able to provide a specific contact or a person to provide education?
posted by dpx.mfx at 1:38 PM on September 15