Upon signing up, coworkers are presented with a list of available payment methods and are given the option of entering their credit card/bank details. After that, their credit card/bank account is charged automatically at the same time that the invoice is sent out. While credit and debit cards are charged automatically, PayPal requires your coworker to confirm the payment before it is made (via a link in an email).
For a general overview, check out the blog we wrote on payment methods here.
Note: You can always change a payment method at a later stage by going back to Setup, and then Automated Payments. This will only change the payment method options for coworkers who sign up after you make the change. Coworkers who already signed up before the change will not be affected by it.