How to Set Up Direct Deposit for Your Business Payroll
The convenience of payroll direct deposit is a benefit for both businesses and employees. It gives employees faster, easier access to their pay while streamlining your company's payroll process. If you're not sure how to set up direct deposit, here's an overview of what you need to know to get started.
Direct deposit versus paper checks
When an employee opts for direct deposit, their payroll funds are sent directly to the bank account of their choice. This gives the employee immediate access to their pay and avoids the need to deposit a paper check and wait for it to clear. They're still provided with an earnings statement displaying their withholdings. You can let your team members view these statements online within a payroll system, or you can provide them with printed copies.
How long does direct deposit take?
Direct deposit is an additional service that can be easily added to your existing business banking relationship. Setting up payroll direct deposit for your employees is relatively simple. Once you've completed the required paperwork, the bank will need to confirm account information for both you and your employees. This could take anywhere from several days to several weeks. Talk to your banking representative about timing estimates before you begin the process.
How to set up direct deposit
1 Choose a provider
You'll need to select a direct deposit provider to facilitate the transfer of your payroll funds into each employee's bank account. If you currently work with a bank for your small business financial services, ask your assigned representative about adding direct deposit. To get a sense of the cost of adding direct deposit, ask the provider about any charges for setting up the service. Don't forget to ask about ongoing costs as well.
2 Complete the paperwork
Once you've selected a provider, you'll need to give them permission to send payroll funds from your account to your employees. Typically, the bank will provide you with a contract explaining their services. They should also provide instructions about what you need to do for the payroll transfer to occur. You'll sign a form authorizing your provider to take money out of your account.
3 Add the option to your payroll
If you use payroll software, you'll need to add a direct deposit option. You should also review your payment schedule and determine what changes you need to make to ensure you're sending out direct deposit funds on time. Before you roll out the new service to employees, you'll want to test the procedures to make sure everything flows correctly between your payroll software and your bank accounts.
4 Gather employee information
Once your direct deposit process is ready to go, you can tell your employees about the benefit. If they choose this new option, they'll need to give you their bank account information and sign an authorization form.
Benefits of direct deposit
Direct deposit is a popular method of payroll delivery because it allows employees to access their pay faster by conveniently placing the funds directly in their bank account. Other benefits include:
- Simplification: Direct deposit simplifies the payroll process by eliminating the need to print and distribute paper checks.
- Potential savings: Your business can save money spent on check runs and postage.
- Improved record keeping: Direct deposit provides a record of the payroll transactions between employee and employer. Information can be managed and organized online, without alternating between paper files and digital files.
- Employee satisfaction: As with all employee benefits, the option to choose direct deposit can positively affect the retention and productivity of your staff.
Direct deposit can make life easier for business owners, HR departments and employees. As a greater percentage of payments and disbursements move online, direct deposit is becoming more expected for many employees. If your business doesn't offer this popular benefit, now is a good time to speak with your banking representative and explore your options.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.