ACH Payroll Processing & Fedwire Blog

ACH Payroll Processing & Fedwire Blog

Best practices for ACH for direct deposit

Tuesday, June 07, 2016
Best practices for ACH for direct deposit

The process of handling money can be tiresome for companies, especially for payroll teams using a number of methods to complete employee payment. While some companies still utilize paper checks for payroll, the majority of businesses in the U.S. have implemented the Automated Clearing House for this procedure. In fact, 82 percent of U.S. workers are compensated via ACH, according to a study from the National Automated Clearing House Association. In addition, 79 percent of organizations that haven't introduced the practice are familiar with ACH.

For both parties, the beginning of this relationship with ACH can be overwhelming. The process is brand new, and although it streamlines the payroll process for companies, the first few months can be a period of trial and error. With insider information on the practice, businesses can avoid as many of these early problems as possible. Cachet has some of the best practices new and current ACH users should follow:

Understand state regulations
The majority of organizations are already aware there are local, state and federal obligations they must fulfill. What these companies may not know is that these responsibilities extend to the direct deposit process as well. The general procedure is regulated at a state level, according to Payments Journal. As a result, businesses with operations in more than one location – especially across states – may be subject to different rules. Some states prohibit organizations from making direct deposit mandatory, while others require companies to allow their employees to choose the financial institution the funds filter through.

Either way, it's a good idea for payroll managers to request recorded permission from workers allowing direct deposit and designating the bank of their choice for the ACH processing portion of the procedure.

Companies should ensure their payroll procedure is clear enough for employees to understand.Companies should ensure their payroll procedure is clear enough for employees to understand.

Create a transparent policy
It's easy for employees to become frustrated about payroll issues, since the payroll process concerns their money. It's crucial for workers to be educated on the process to a certain degree – even if it's not step-for-step – to ensure they understand the necessary elements of direct deposit and how their funds arrive in their accounts. Common problems can be corrected by instituting a policy that is transparent.

According to HR Voice, a clear and straightforward direct deposit via ACH payroll program should include an explanation of:

  • How the payroll process works – direct deposit specifically.
  • How employees are classified.
  • How salaries are determined.
  • Employer reporting obligations.
  • Levels of vacationable earnings.
  • Company procedures for handling payroll errors.
  • How wages and promotions are calculated.

Pick a dependable partner
The payroll process can be overwhelming for all parties involved, but managers in charge may find it the most stressful. With so many tasks to keep track of, plus state regulations to follow, the procedure can quickly become too much for leaders to handle. When employee well-being and happiness is on the line, efficiency is of the utmost importance as is protection of valuable worker data.

"Payroll partners can ensure compliance with state and federal regulations."

To help with direct deposit via ACH and all other payroll obligations, companies can outsource the responsibilities to a third party. It's important for businesses, however, to find a partner with a strong and trusted reputation. These service providers will perform all duties of an internal payroll department, while maintaining compliance with all necessary state and federal guidelines. This way, company leaders can turn their focus to other important tasks and leave payroll in the hands of professionals.

Payroll – especially that utilizing direct deposit via ACH – can be complicated for businesses in all industries. Organizations want to complete the process quickly and correctly to ensure employees receive their funds on time and are satisfied with the procedure. Companies can follow best practices, including understanding state regulations, creating a transparent policy and outsourcing the responsibility, to ensure the method is working effectively for both parties involved.

Organizations searching for a trusted direct deposit and payroll provider should no further than Cachet. Cachet offers ACH direct deposit payroll processing services complete with an experienced management team, patented double entry system and efficient and economical options.

Contact us to learn more about ACH payroll processing and direct deposit best practices


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