Direct deposit of payroll is both a popular and a valuable convenience. Priority Pay Payroll offers direct deposit services that allow for your payroll funds to be directly deposited into the employees’ accounts, including both savings accounts and checking accounts. Here is what you need to know in order to understand how direct deposit works.
1 – The first step for employees who want to sign up for direct deposit is simply to enroll. Employees should create an enrollment form which is essentially authorizing the company to directly deposit money into one of their accounts, either a checking account or a savings account. The authorization form that you fill out for this purpose is going to vary slightly from one company to the next, but all of the vital required information is going to be the same because most financial institutions simply require the same information in order for this to work.
2 – The next step in the process for employees is to wait to see if the employer is going to make a test deposit. Not every employer will make a test deposit, and what it usually depends on is what service the employer is using. The company that is making the direct deposit may decide to perform a test run simply to make sure that the account numbers they were given have been correctly entered in. This may be done with no dollar amount at all, or it may be done using a very small amount such as a few cents for example.
3 – The third step in this endeavor is the processing phase. The company that the employee works for will process the payment through direct deposit. This is done through ACH, which is a banking term for an Automatic Clearing House transaction.
4 – The fourth step in the process is the post. The financial institution will credit the employee’s account, and the transaction will be automatically reported on their monthly financial account statement. The employer at this point simply has to wait until they can verify that the payments have all been successfully deposited. It is very rare for problems to occur when it comes to ACH and direct deposit, but although rare, problems still can exist during this point.
5 – As the employer, you will provide an electronic or paper confirmation that the direct deposit has been completed. This is going to confirm the date and time of the deposit, and will also include the net payment amount and any deductions that occurred. If further information is needed by the employee, or if a confirmation is needed by the employee, then you can have the employee go online and view their payment information, or you can provide a paper confirmation explaining how the direct deposit worked. This final step is the “confirm and verify” step of the process.
If you own your own company, it would be wise to consider direct deposit services offered through Priority Pay Payroll.