MAR 19, 2024
Payroll Direct Deposit: A Guide for Getting Your Company Set Up
Starting a business means putting a lot of parts in place and then setting them in motion. Among the most important administrative elements is your payroll system. While there are a variety of ways to compensate your staff, using direct deposit payroll services has become very popular; global financial platform company Intuit reported that as of 2022, about 93% of employees in the U.S. receive their pay by direct deposit. In this blog, we’ll look at both how direct deposit works, and how it benefits both employers and employees.
The Basics
Direct deposit is when funds are electronically transferred from one bank account or financial institution to another account or institution. When using payroll direct deposit, the employer’s financial institution sends each employee’s pay digitally to the employee’s bank account. This method is automated, and often performed through a third-party payroll service provider, like Payroll Vault. Both employers and employees benefit from the speed and security; more on this later.
The Setup
Setting up payroll direct deposit is a straightforward, step-by-step process when you use a third-party payroll provider. The steps are as follows:
1. Choose a reputable payroll service provider that offers direct deposit and has a good suite of security measures and customer support, like Payroll Vault.
2. Complete all necessary paperwork, such as agreement forms with the banks and service provider.
3. Gather and submit all necessary employee information to the payroll service, such as employee names, bank names, account numbers, and routing numbers. You’ll need to get consent from your employees to gather this information, and some information may need to be provided by the employees themselves.
4. Make sure all the necessary information is put into the payroll system and is accurate.
5. Synchronize the direct deposit system with your payroll schedule to ensure timely payments.
The Benefits
Using payroll direct deposit is beneficial to both employers and their staff. Among the biggest benefits are the following:
- Security – Direct deposit ensures employees’ pay is sent directly to their bank, with no risk of lost or stolen checks. Banks and payroll services like Payroll Vault also have digital security measures in place to keep transfers protected from malicious software and other digital threats.
- Convenience – Direct deposit eliminates the need for employees to make regular bank visits every payday and saves employers the hassle of needing to write or print out and/or mail paper checks.
- Cost Savings – An employer-specific benefit, using direct deposit will eliminate the cost of paper checks, as well as the cost of postage, envelopes, and mailing labels if the employer has been mailing out paychecks.
- Employee Satisfaction – Having a safe, reliable means of receiving pay will lead to a happier workforce for the employer, and employees will appreciate regularly receiving their pay at the start of the business day on payday (the usual time that a direct deposit hits).
- A Green Business Practice – Lastly, by going digital with payroll, an employer eliminates the paper waste caused by using paper checks.
As more businesses in various industries are embracing digital transactions, updating the way they handle payroll is a natural step in the evolution of business administration. Using direct deposit to pay employees will keep a business in line with the changing standards and help keep that business viable and in operation for many years to come.
Update Your Payroll System with Payroll Vault
Whether you’re updating the payroll system of an existing business or setting up a system for a new business, we’re here to help you. Our boutique-style business model offers business owners like you a customized service; we can provide you with anything from help planning payroll to employee background checks to company policy materials and more. Don’t miss your opportunity to improve your business administration; visit your nearest Payroll Vault location today to learn more.
