Payroll Direct Deposit
9 minutes read

Payroll Direct Deposit

As an employer, it’s important to pay your employees on time and without any errors.

So, it is important to ensure that your employees are receiving their paychecks on time. If you don’t have a good image for timely payment or have an issue, then it could be challenging to attract and retain skilled employees. To avoid this, you need a quick and efficient payment method. One such method is direct deposit, which guarantees timely payment.

However, we will see the following points on payroll direct deposit. That can help you to understand and solve your problems.



What Is Payroll Direct Deposit?

Payroll direct deposit is an electronic payment method that electronically transfers the fund/salary directly into the bank account rather than using physical or paper paycheque.

Direct deposit can help payees receive payment faster. This method is most widely used due to its effectiveness and smooth processing. With one click, the salary from the company’s account can be transferred to all employees’ accounts.

This is a more convenient method than issuing a cheque. The payment transfer is faster and easier for employers. Likewise, employees don’t have to worry about misplacement or stolen cheques.

How does direct deposit work?

To receive direct deposit payments, both employer and employee must have a bank account wherein the payment can be transferred.

The employer must enter the details of the employee’s bank account into their payroll software system. After entering the details into the system, the employer can electronically send the salary on payday. When payday arrives, the system will automatically transfer the employee’s salary to their bank accounts without hassle.

Benefits of direct deposit for Employers

It provides various benefits in comparison to a physical paycheque, such as –

  • Secure – The money seamlessly moves from one bank to another account in a secure way.
  • Prevent misplacement – You don’t need to worry about misplaced, altered, or stolen cheques.
  • Cost-effective – Saves cost because it decreases the need for paper cheques and work hours on payroll activities.
  • Time-saving – This option is reliable and will immediately send the money to the employee’s bank account on the chosen payday.
  • Allows companies to make an electronic transfer to all types of savings accounts.

How Long Does Direct Deposit Take?

To clear the direct deposit, normally, it takes 1-2 working days. The funds transfer is instant, but bank verification can take time/days, especially on weekends and public holidays. You may factor this delay into payroll, so the employee may receive their deposit on the day you’re supposed to be paid. Usually, employees can withdraw their funds the same day, but in some cases, they may have to wait for the next business day.

How to Set Up Payroll Direct Deposit?

Following are the processes to set the payroll direct deposits –

  • Firstly, you collect employees’ bank account details, including the bank name, branch name, account number, and IFSC or MICR code.
  • Select a bank or financial institution that provides direct deposit services and is widely accessible to your employees. Make sure that they support electronic fund transfers (EFT).
  • But before that, you need to register with the National Payment Corporation of India (NPCI) to enable ETF through systems such as National Electronic Fund Transfer and Real-Time Gross Settlement.
  • Now, you can input the data and generate files through payroll software or accounting software that include employees’ details, such as employee names, bank account numbers, salary amounts, and payment dates.
  • Establish a payroll schedule that details pay dates and submission deadlines for processing payments.
  • As per your bank’s procedures, you may have to authorize the payroll transactions using secure authentication methods such as digital signatures or two-factor authentication.
  • Run your payroll and ensure funds are transferred to employee accounts on the scheduled pay dates.



What is the disadvantage of direct deposit?

District deposit or electronic banking offers lots of benefits, but there is also a higher risk of online security breaches. Cybersecurity measures are important to protect sensitive financial information from attacks such as, denial-of-service, and direct-access attacks. To protect it, use a password manager or create complex passwords, including letters, numbers, capital letters, and special characters, to encrypt personal data.

Can a direct deposit be denied?

Yes, if a bank’s details are incorrect, then the bank can refuse to transfer your direct deposit transactions.

Is payroll the same as a direct deposit?

No, Direct deposit is a method of payment that involves electronically transferring funds to an employee’s bank account, while payroll refers to the process of calculating and paying employee compensation.

This is the end of our discussion on payroll direct deposit. Let us know your other questions and opinions on this topic. Mention below the comment box.

Check out more related posts –

Features of payroll software when buying software

Payroll Processing in India

What is Payroll? A Clear Explanation for Employers and Employees

Say Goodbye To Your Payroll Struggles

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