Direct deposit is a feature included within payroll systems that allows you to deposit employee pay directly into a bank account. Payroll software programs vary when it comes to their direct deposit capabilities. For example, some systems allow you to deposit funds to your choice of bank account, while others require the money to be transferred via their service. Here are some factors to consider when trying to find the right direct deposit feature for your business.
There are two main ways payroll systems allow you to transfer pay. You can either have the funds deposited directly into each employee’s individual bank account from your own choice of bank, or you can use a service which takes the funds and deposits them into the employee bank accounts for you. By using your own bank to deposit the funds, you may save money; however some banks do charge for this service and fees vary greatly. Using a service to deposit the funds does incur ongoing costs also, so be sure to check the costs of the service before deciding on one.
Deposit employee pay and third party pay.
Obviously the most important aspect of direct deposit is the ability to distribute employee pay to their bank accounts. But some payroll systems go a step further, and also provide an option to deposit third party pay electronically. This function allows employers to pay third party payees, such as 401K management companies or insurance companies, via electronic deposit, rather than processing a check manually. Sending these payments electronically can be a huge time saver when compared to writing and sending paper checks.
Deposit to multiple bank accounts.
A basic direct deposit system will allow for one account, but some systems allow for multiple deposit accounts. This way, employees can deposit part of their check to checking, part to savings, another part to a holiday savings account, and so on. While this typically does not cost the employer extra, it provides employees with the perk of more comprehensive money management options. So it’s a win-win!
Some payroll companies offer employers the option of loading (depositing) employee pay to a pay card (a debit card) instead of into a regular bank account. This is an excellent option for employees who do not have bank accounts. For those without bank accounts, it eliminates concern about where to cash a check, and also the associated check cashing costs.
It pays to use direct deposit, and all the features that go along with it. Check into your payroll software and what it can offer you for direct deposit. You could be on your way to great time savings and happier employees.