Direct Deposit — Benefits, Best Practices, and Considerations
What is direct deposit?
Direct deposit is a payment method of wages where the employer electronically transfers funds into the employee’s checking or savings account. Employers and employees often choose this payment method because of its convenience, security, and efficiency.
What are the benefits of direct deposit for employers?
There are several benefits your organization can take advantage of when it comes to direct deposit within your UKG Ready solution. These include time savings, cost reduction, increased security, and environmental influence.
Time Savings: One thing we all wish we had more of is time. You and your organization can get more time back in your day by reducing the time spent on specific payroll-related tasks. With direct deposit, you can eliminate having to write, sign, and fold checks; stuffing them into envelopes; and delivering them to employees. These payroll tasks can be very time-consuming and labor-intensive, especially if you have multiple pay cycles. Another advantage of utilizing direct deposit is that employees will not have to wait for checks to be printed and delivered, meaning they can get their earnings on time. And there is no need to mention how weather delays and holidays can cause issues to employees receiving their paychecks on time.
Cost Reduction: Your organization will not only be saving time but also reducing costs associated with re-issuing lost or stolen checks, stopping payment charges that a bank may levy, and investigating when a check has gone missing. There may be times when you’re unable to process payroll before the check date. But with advancements in electronic payment technology, like same-day automated clearing house (ACH), your business can have more control over your funds.
Increased Security: It’s time to become more secure. Lost or stolen checks are a common source of identity theft and fraud. Direct deposit eliminates the risk of stolen checks and forged signatures. Electronic deposits can increase the protection of both employees’ personal information and the employer’s account information.
Environmentally Friendly: Something you may not have even thought of is that your organization can become more environmentally responsible. Having a paperless payroll system is environmentally friendly because it reduces a company’s carbon footprint. The green impact can be further expanded by offering online pay statements, which can be accessed 24/7.
What are the benefits of direct deposit for employees?
Direct deposit will positively impact your organization’s overall employee experience. Employees will no longer have to make a special trip to the bank and wait in line to cash or deposit their checks or pay fees if they cash them elsewhere. An added convenience is the fact that your employees will not have to be at work to collect their paycheck. With direct deposit, their money becomes immediately accessible from anywhere, even when on vacation. Woo-hoo! Employees will not experience any delays due to mailing nor need to worry about misplacing, losing, or getting their paychecks stolen — avoiding not only a headache for your employees but also for your payroll department.
How to set up direct deposit for your employees
To set up direct deposit, your organization must collect the necessary banking information from your employees. This includes the following:
- Bank name
- Bank routing number
- Bank account number
- Bank account type (checking, savings)
- Action: Add direct deposit information to new hire checklist
Bank Routing and Account Validation
Thinking direct deposit is the right move for your organization? Consider using the UKG Ready prenote feature when setting up your direct deposit option. The prenote process involves sending a zero-dollar amount through an ACH network as a test before an employee’s direct deposit occurs. There are no additional fees associated with using the prenote option within UKG Ready, nor does it require any further actions when processing payroll. The prenote account validation process can take up to 10 days to be completed and is initiated during the first payroll process once the direct deposit information has been entered. Suppose you’d like to waive the prenote at any given time. In that case, this can be accomplished by going into UKG Ready Company Settings > Global Setup > Company Setup, selecting the Payroll tab, and scrolling to the Payroll Setting widget. Here you can adjust the “Prenote Expires in” field found in the Default Employee Settings box. For an additional fee, banks can provide reconciliations should your organization require verification.
Another option is to not use the prenote process and instead proceed with collecting and entering all the necessary banking information from employees. To manually enter employee direct deposit information, navigate to Pathway in your solution: Payroll > Employee Payroll Maintenance > Direct Deposits > Add New. Once the bank routing and account information have been entered, the first direct deposit will occur during the next payroll processing run.
Employee Self Service (ESS) Options To Collect Direct Deposit Information
Check out a few of the self-service recommendations below that can help your organization collect direct deposit information:
- Set up an HR action for direct deposit.
- Once in UKG Ready, select HR > HR Actions > Direct Deposit > Start.
- Select +Add and begin entering the banking information.
- Once in UKG Ready, select HR > HR Actions > Direct Deposit > Start.
- The “calculation method” field is used when an employee wants to split their deposits across multiple accounts. One employee can have up to five different direct deposit accounts (savings, checking, money market, etc.).
- The “Reserve Live Check” feature is used when an employee has direct deposit set up but wants some funds to be allocated to a live check.
- Add a note to upload a voided check or bank statement to verify banking information.
- Set up workflow with payroll approval once employee submits information.
- Leverage the mobile app — If your employees use the new UKG Ready mobile app, they can set up and edit direct deposit information from within the app.
- Watch this short video on the mobile app capabilities: Workforce Ready Mobile: Direct Deposit — YouTube.
- Leverage ESS — Avoid printing direct deposit advice slips and notify employees that their direct deposit slips will be available via ESS (if rules and regulations for your organization permit). ESS can also be used to have the employee enter their banking information.
Establishing a direct deposit process within your organization is a no-brainer. Not only can it benefit your organization by reducing cost and time, but it also makes your employees’ experience much more convenient. Who doesn’t like to get paid on time with little worry? As always, ensure you follow the proper procedures before rolling out a new process like direct deposit within your organization.