Understanding Direct Deposit Process
Paying your employees via direct deposit can help alleviate headaches for you and your employees. However, there are a few things you need to understand first in order to set up direct deposit services.
In this article
- Impact on Pay Calendar
- Direct Deposit Employee Authorization
- Direct Deposit Credit Application
- ASAP's Obligations
Impact on Pay Calendar
Direct deposits require 2-3 days to process in advance of each payday/check date to allow sufficient time for the banking system to properly fund the employee's pay into their accounts. The full payroll costs (net pay + taxes) will be withdrawn from your business account 2-3 days in advance of the paycheck date. If you pay your employees a few days after the end of each pay, you will need to adjust your company's pay calendar to accommodate the additional processing days for direct deposit.
Direct Deposit Employee Authorization
Employees interested in being paid via direct deposit must return a signed copy of direct deposit authorization to their manager, which contains sufficient language to allow you to initiate credit (payments) into and/or debit (reversal) entries from the account holder's account should an error occur. Reversal entries must be processed within a limited numbers of days from the original credit entries, so please promptly alert your account manager to any errors. Before a reversal can be processed, you will need to supply a copy of the employee's signed direct deposit authorization so that we can forward it to the bank.
Direct Deposit Credit Application
If you would like to offer direct deposit to your employees, please complete our Direct Deposit Credit Application to qualify for this service. Please allow up to 10 business days for processing.
ASAP does NOT offer direct deposit services to all employers. We reserve the right to stop the service at any time, such as if your payroll is submitted/approved without sufficient time to meet the 2-3 day processing standards or should you fail to fund your payroll liabilities properly. ASAP also may request that you fund your direct deposit liabilities outside of the ACH system using an alternative means, such as wire transfer or reverse wire authorization.
Please understand that we must follow these requirements in order to comply with NACHA guidelines in order to remain in good standing with our financial partners. The NACHA system, which direct deposit processing relies upon, differs from credit card processing systems in many ways. It may also differ from some types of ACH services that are directly established with a financial institution. This is a complicated area of banking and we're happy to connect you with an ACH specialist to learn more about these procedures.