4 Best Ways to Pay Unbanked Employees

Who are Unbanked Employees and how should you be paying them? Read this blog to find out the 4 best ways to pay unbanked employees…

It is the responsibility of an organization to pay their employees within the stipulated time frame of their work cycle. After receiving the paycheck, whatever employees do with the money is beyond the purview of the organization. These days, many employers are using direct paychecks to pay their employees for the services rendered by them. The nature of payment and compensation to employees is changing day by day. However, unbanked employees face other serious challenges, apart from how and where to send their money. These challenges increase their stress at work, thereby reducing their productivity. Hence, understanding them is very important for an organization to be able to help the unbanked employees cope up with their financial stress and risks associated with it. Read this blog to find out who are unbanked employees and the 4 best ways to pay unbanked employees of your organization.

Who are the Unbanked Employees?

Unbanked employees are those employees who do not possess a savings/current bank account at any bank or union. It refers to those households in which no one has any bank account for the purpose of saving and earning interest. Such individuals need to rely heavily on alternative financial services like money orders, check cashing, etc.

There are various reasons why anyone might choose to be unbanked. Strained finances seem to be one of the major reasons for individuals and employees to go unbanked. Some of the major reasons according to a 2019 FDIC survey are:

  • Almost 49% of individuals do not have enough money to meet minimum balance requirements of bank accounts.
  • Almost 36% of individuals do not trust banks.
  • Almost 36% try to avoid banks to have more privacy.
  • Almost 34% think that bank fees are too high.
  • Almost 31% think that bank fees are too unpredictable.

What are the impacts of being unbanked?

The following are the two major impacts of being unbanked for employees:

Access to various financial services is a burden for them

Employees without bank accounts do not have too many options when it comes to accessing various financial services. Without a bank account, they can’t deposit a physical paycheck or set up a direct deposit. If they have a problematic banking history or low credit score, they can’t easily access their money with a debit card or borrow against it with a credit card, and they don’t have the same fraud or consumer protections that come with these traditional financial services.

It affects Employee Performance

Financial stress takes a negative toll on an employee’s performance in the organization. Majority of the employees who are unbanked are unable to afford bank fees, which increases the stress burden on them. A survey also shows that the instances of unbanked employees is higher amongst the low-income category individuals. It then becomes the interest of the organization to lower the financial burden of their employees since it will also induce them to be happier and increase their productivity at work.

4 Best Ways to Pay Unbanked Employees

Manual Paychecks/ Payroll Checks

Printed and hand-written physical paychecks have been a staple in employee payroll for a long time. Employees with traditional banking relationships can deposit wages easily, and unbanked employees are able to access funds using check-cashing services, making checks a universal option. It was once fairly common for banks to cash checks drawn on accounts other than their own. Now, some banks have cut out this practice altogether, and other banks and check-cashing facilities now routinely charge employees a hefty fee to perform the service.


  • Employees have a proof in paper of the payment that was made to them, unlike the case with only cash
  • Employees get a proper breakdown of their salary, various taxes, deductions and allowances to them, also known as pay stub.
  • Relatively simple as employees don’t need bank accounts or direct deposit facilities.


  • Employees need to bear the fees to cash the paychecks
  • Employers need to get them printed or mailed, which requires special equipment if done in-house and takes time.
  • Restrictive bank practices make it tougher for employees without bank accounts to cash their checks.
  • Security Considerations.

Payroll Debit Cards

A payroll debit card is a good solution to this dilemma. Payroll debit cards, generally obtained through a payroll service, offer a convenient way to pay employees who do not have bank accounts by instead using a branded (e.g., VisaMasterCard, etc.) pay card. Pay cards are increasing in popularity as an electronic wage disbursement option. Employers can issue personal debit cards to employees and transfer funds on payday regardless of an employee’s banking status. The cards can then be used like any other debit card to make point-of-sale and online purchases, pay bills, and transfer money.


  • Employer’s are able to directly deposit wages and salaries into their employee’s cards
  • Employees can use the card like a debit card in ATMs, stores, online transactions, shopping, etc.
  • It allows the employees to have immediate access to their funds.
  • These are cheaper to administer than paychecks and come with fraud protection measures.


  • As per the provider of payroll cards, such cards can charge a lot of unnecessary or hidden fees and charges for various services rendered by them such as SMS charges for checking balances, etc.
  • Because payroll cards are a relatively new option, laws governing them are still evolving. This can still limit their usage.

Online Money Apps

These are basically various applications developed for the purpose of making cashless transactions such as PaytmPhonePe, etc. in India. Such apps have their inbuilt wallets and bank accounts that allows unbanked employees to carry out all their transactions using such apps, while also being able to maintain a record of everything and check balances. Such apps act just like any other bank accounts and with the advent of digitization and cashless economies, their use has increased manifolds.


  • Employees get ample options to choose from, such as PayPalVenmo, etc. which are free to use and do not require any subscription fees and/or charges.
  • Employees have direct access to their accounts and cash without the need for having a bank account
  • Employees can give all such information to their employers, just like a bank account, who can then transfer the pay.
  • Some apps offer payroll integrations.


  • Employees mandatorily need a smartphone and internet connection to be able to avail such services
  • Since many businesses still don’t accept such forms of payment, employees might not be able to use such apps everywhere and for everyday purchases.
  • Depending on the type of accounts, employees sometimes might have to pay a fee.


Paying unbanked employees in cash means they will receive their full post-deduction wages, but this option comes with serious drawbacks for employers. First, cash wages need to be calculated, withdrawn, and distributed manually. Depending on your payroll structure and individual taxes, amounts can vary greatly from employee to employee. Cash wages also make fastidious record-keeping a necessity and challenging.

While paying with cash has no serious advantages apart from being the simplest, it poses serious disadvantages for both employers and employees. Distributing cash wages for numerous employees every pay period, though, reduces your organization’s productivity — all the time spent counting, sorting, and doling out bills and coins would be better utilized elsewhere. Paying with cash is a very risky transaction for both employers and employees because neither of you get a paper trail. Since cash payments must be recorded manually, keeping things organized can become a major headache for businesses. Hence, cash is not a convenient or secure method of payment to employees.

In Short

Paying unbanked employees can be a serious and challenging task for any organization. Therefore, it is important to carefully weigh the pros and cons of each of the above methods and make an informed decision with regards to what suits best- both from the employer and the employees’ point of view.

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