Payroll direct deposit is a popular process that allows employers to electronically submit an employee’s net pay to one or more bank accounts, streamlining paperwork and eliminating the need for manual deposits. Payroll services and software programs handle the process of generating paper receipts and creating payroll reports.
A payroll direct deposit is a process that allows an employer to submit an employee’s net pay electronically to one or more bank accounts. Using this process to compensate employees for their work helps streamline paperwork and eliminates the need for the employee to find an opportunity to manually deposit a paycheck. The use of direct payroll deposit has become more common in recent years and is especially popular with companies that choose to outsource payroll activities to a vendor.
Using the direct deposit strategy to provide wages and salaries to employees is made easier by the use of Internet technology. Small businesses that contract with a payroll service provider are typically able to upload incoming payroll information by a particular day of the week. The payroll service handles the calculation of withholding, insurance premiums, or other deductions and publishes an online report of the final payroll activity structure for that pay period.
By associating bank information with each employee account in the payroll program, the payroll direct deposit service can distribute net pay among more than one account. It is not uncommon for employees to provide account numbers for savings and checking accounts. Assuming the payroll service is provided with payroll data in a timely manner, the service makes electronic filings for each employee the afternoon before the official payday. This allows banks to post deposits to accounts on the actual payday. In turn, employees are able to use those funds by close of business on the record date.
Many services that oversee payroll functions provide each employee with online access to the current year’s payroll history. The breakdown includes gross compensation earned in each period, along with a breakdown of all withholding activity and the net compensation amount recorded in each bank account listed in the database for that employee. It is not unusual for a payroll direct deposit service to provide the employee with a paper receipt for each pay period that reflects any type of earning activity.
A number of payroll software programs also allow employers who handle payroll functions in-house to set up electronic transfers of net pay into the bank accounts associated with each employee file. Like payroll services, these software programs typically initiate payroll direct deposit the afternoon before the pay date, making it possible for funds to be posted on the actual payday. The software also handles the process of generating paper receipts for each employee, as well as creating payroll reports that can be printed as and when needed.
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