Same-day direct deposit payroll is an electronic transfer of net pay from an employer to an employee’s personal bank account. This exchange takes place across a network called the Automated Clearing House (ACH). With same-day direct deposit, employees can usually transfer or withdraw money the same day net pay goes into their bank account.
How does same-day direct deposit work with payroll?
To make an ACH transfer – a direct deposit – the employer sends money from its bank account directly to an employee’s bank account. Both banks validate the requests and the ACH approves the transactions. Employers can use direct deposit for a one-time payment or on a recurring basis of bi-weekly or monthly salaries.
What are the steps for same-day direct deposit payroll?
- Step one: Choose a direct deposit provider
Employers can either work with a bank that handles their business bank account or a payroll platform that can make direct deposits.
- Step two: Complete setup paperwork
Banks may ask employers to sign the ACH terms and conditions and provide up-to-date financial statements that prove they can cover the transactions. Businesses using a payroll provider may need to provide details about their company and a bank account number.
- Step three: Collect employee information
Each employee needs to submit information such as: bank name, account type, account number, and routing number.
- Step four: Upload employee data
Employees can enter their bank information themselves if the payroll platform permits, but if not, the employer needs to give the financial institution the relevant details. Many employers export a National Automated Clearinghouse Association (NACHA) file to transfer this information.
- Step five: Sync direct deposit with a payroll schedule
Some banks and payroll platforms have employers run payroll a few days before payday for direct deposit.
- Step six: Process payroll
If the information and process are accurate, employees will automatically receive their salaries in their bank account when businesses process payroll.
What are the advantages of direct deposit payroll?
Direct deposit payroll helps prevent fraud by eliminating the need for checks. If checks are lost or stolen, it opens employers and employees up to security threats.
Operating without checks also helps businesses save money by not needing to allocate resources to postage and printed paper.
An electronic system means employers can keep accurate records of their bookkeeping activities and easily see transaction history.