They pay out to ALL wallets that hold PAY tokens. (in ETH)

But if that wallet happens to be an exchange, the exchange will get the ETH. It's then up to the exchange if they are willing to split that out between the people who hold the PAY on their site. As far as I'm aware, no exchange has made any such commitment.

So yes, if you want to be sure of getting your payouts, keep them (your PAY tokens) off an exchange an in your wallet.