Today, it is estimated that over 90% of employees in the United State are paid through direct deposit. Not only making everything simpler for your employees since they don’t need the bank on the paydays direct deposit also allows you to save about 3% per check.
Generally speaking, direct deposit is considered cheaper, safer, greener, and more practical. This page will show you an ultimate guide on how to set up direct deposit for employees. Just check this out!
How to Set Up Direct Deposit for Employees?
Direct Deposit for Small Businesses
For short, direct deposit is an electronic form used for paychecks. It involves the electronic transfer of funds to an employee account from business owners.
Not only for paying wages, but direct deposit in small businesses can also be used for retirement benefits, investment distributions, tax refunds, expense reimbursements, insurance claim payments, and more.
According to the American Payroll Association survey in 2018, almost 93% of US workers, both small and large businesses, are paid using direct deposit. This payment method provides a win-win solution for both employees and business owners.
Direct deposit will provide you with full control over your finances. Also, the payment method allows you to keep up-to-date about your payment records. Furthermore, the direct deposit also makes it easier for you to avoid confusion about your payroll deposit.
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How Much Does It Cost?
This is true that direct deposit is a money-saving option. However, there might be service fees that you have to pay. Most of the time, the fees required range from $50 to $149.
Not only that but payroll providers also charge workers every time they transfer money to their accounts. The common fees charged for individual deposit per transfer can range from $1.50 to $1.90.
In this way, make sure that you contact your payroll provider to figure out how much the direct deposit cost. You also need to find information about how much is needed to maintain direct deposit as well. Despite the fees that the employers have to pay, the cost of direct deposit is relatively low.
Setting Up Direct Deposit for Your Workers
Speaking about how to set up direct deposit for employees easily, there are 4 basic steps that business owners should put into consideration. The setting up process itself will run through a bank or a direct deposit payroll provider. Here are the steps.
1.Select a Payroll Provider
Since you will depend a lot on the payroll provider for the payment system, the selection process is important. In this way, you need to make sure that you carefully learn about the service provided.
Some other factors such as fees and other components of direct deposit management also play an important role in the selection process. It will be very helpful if you can start it by inquiring about the bank you are currently working with.
This is because most banks now also come with direct deposit management services. Their fees and terms will allow you to have a baseline when you need to compare your choices.
2.Collect Data from Your Workers
Once you have set your heart on a direct deposit payroll provider, the next thing you should do is collecting information from your workers. The data collected will be required in the payment process.
Most of the time, payroll providers or banks will give you direct deposit forms that your workers should fill in. However, some information required in the forms is usually universal.
In collecting the data, make sure that your workers can provide the following information safely and reliably.
- Key Numbers
Key numbers needed in the direct deposit are the Social Security number, bank account number, and routing number of the workers.
- Personal Information
Depending on the direct deposit payroll provider of your choice, the personal information required can be different from one provider to another.
However, it usually consists of standard information such as the name and address of the employees. The information is required for verification, avoiding mixups, and issues related to deposit delivery.
- Consent and Authorization
Consent and authorization are very much needed in direct deposit. In this way, a payroll provider will ensure that the forms filled have covered the legal basis. It will make sure that your workers have fully understood the agreement made and are entering it with their own consciousness.
3.Add Workers to the System of Direct Deposit
Keep in mind that you still had a payroll system before you started using direct deposit. In this way, the new payment system that you are going to use needs to be updated. You will also need exchange information since you have to run your payroll by using a new provider from now on.
You can simplify the process automation features for the payroll. They will make it possible for you to process everything related to the direct deposit quickly, consistently, and easily.
4.Choose Your Deposit Schedule
Last but not least. Picking up the payroll schedule is the next important step on how to set up direct deposit for employees. In selecting the deposit schedule, there are a few things that you should think about well, including your financial schedule.
Keep in mind that funds should be liquid and available in your business account for the transferring process and before paycheck distribution. In this way, it is critical to choose a payment schedule that meets your expected cash flow.
Aside from the financial schedule, you also need to consider the payment time. Bear in mind that your workers will highly rely on their checks. Thus, making sure that the paychecks are received in a timely schedule is important.
Also, you need to know that despite being digital, each time the ACH transfers funds to your workers’ account, the process required can be done instantly.
Most of the time, banks need at least 2 workdays for the payroll provider to transfer money from your business account to your workers’. Not only that but in the case of holidays, the downtime sometimes will be expanded as well.