The benefits of direct deposit are numerous. You can easily pay employees no matter where they are located. Employees gain immediate access to their pay as soon as it’s deposited in their bank accounts.
To start benefiting from direct deposit, learn how to set up direct deposit for employees at your business.
How to set up direct deposit
It’s relatively easy to set up direct deposit, especially if your payroll service provider offers it.
When you decide to start using direct deposit at your business, you will need to find a direct deposit provider. Then, you will need to collect employee information and make sure direct deposit is turned on when you run payroll.
Find a direct deposit provider
To start, you need to find a direct deposit provider. This organization will remove the funds from your account and deposit them into your employees’ accounts.
You might be able to set up direct deposit at the bank where you keep your small business bank accounts. Contact your bank representative to discuss your options and pricing.
Also, find out if your payroll software provider offers a direct deposit feature. Some payroll software companies, including Patriot Software, offer free direct deposit to their customers.
When you sign up for direct deposit services, you may need to provide the following:
- A direct deposit application
- A bank statement for your business bank account
- Your FEIN
- A voided business check
Your direct deposit provider might deposit and withdraw a few pennies from your business bank account. You will then have to verify the amounts. This process helps verify that the account belongs to you.
It might take up to 10 business days to set up direct deposit with your provider. But, the process may be faster depending on your provider and how quickly you verify the amount deposited in and withdrawn from your bank account.
Gather employee info
Before you pay employees through direct deposit, you must collect some bank account information from them. Employees need to give you:
- Their bank account number
- The bank account type (checking, savings)
- The bank’s routing number
- The bank’s name
Most of this information can be found on a personal check. The employee can also get this information by calling the bank or looking in their online banking account.
You might also let employees divide their paycheck between multiple accounts. Employees can divide their paychecks by percentage or fixed dollar amount. For example, an employee might request that 80% of their paycheck is deposited in their checking account and 20% is deposited into their savings account. Or, an employee might indicate that they want $50 from every paycheck to go into a savings account and the remainder to go into their checking account.
You might create a standard form to collect this information. If you use employee portal software, employees can log in to initially fill in their direct deposit information. They can also update their information in the software. The information is automatically connected to your payroll software.
Before you run payroll, make sure your direct deposit feature is active and all employee information is entered. If you must run payroll before your direct deposit service is active, you will have to write or print checks for your employees. Also, if you are missing an employee’s bank account information, you will need to issue a check.
After you have direct deposit set up and employee information entered, your employees will automatically be paid by direct deposit every time you run payroll.
If an employee doesn’t want to use direct deposit, you can pay them with a different method. For example, you can pay one employee with direct deposit and another with a handwritten check.
Your direct deposit provider might have restrictions on how many days before the pay date you must run your payroll. For example, you might have to run payroll four business days before the pay date to ensure that employees will receive their pay on the pay date. Your direct deposit provider might charge a fee if you need it to process the direct deposit payment sooner.
Patriot’s small business payroll software comes with free direct deposit. That means you easily reap the benefits of paying your employees with direct deposit. Get a free trial of the payroll software to see how it works.