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How to Set Up an Optional Direct Pay Deposit Program

July 6, 1999
Related Topics: Finance/Taxes, Policies and Procedures, Featured Article
Issue: Your company is considering offering employees the option of direct pay deposit that automatically deposits paychecks into an employee’s checking and/or savings account in participating banks. Advantages of participating in such a program are numerous. For the employer, costly steps in the payroll process are eliminated, such as stopping payment on and reissuing lost or stolen checks. For employees, pay is available on payday because it is automatically deposited, employees do not have to visit their banks or bank by mail to deposit their paycheck, and they no longer have to worry about lost or stolen paychecks or about receiving a paycheck while on vacation. Now, how do you go about implementing a direct deposit program?

Answer: Using the following guidelines, a successful direct deposit program may be set up in as little as 45 days, once direct deposit procedures have been set up with your Originating Depository Financial Institution (ODFI). Of course, this schedule may not work for every employer, and you should work with your financial institution to determine a schedule that is appropriate for both your company and its employees.

45 Days Toward Direct Deposit

Day 1-7

Obtain necessary implementation paperwork from ODFI and announce Direct Deposit to supervisors and get their suggestions for smooth implementation.

Day 8-15

Meet with employees to explain Direct Deposit and distribute promotion materials. Have new employees sign-up on the first day of employment. Place paycheck stuffers promoting Direct Deposit in all paycheck envelopes.

Day 16-25

Begin sign-up period. Collect employee financial institution and account numbers.

Day 29

Forward direct deposit information to your ODFI.

Day 33

Test the system with your financial institution; issue optional notifications if you decide to use them.

Day 35

Remind employees that the next pay period is direct deposit; use posters, flyers, newsletter articles, interoffice e-mail, and one-to-one communications. Remind employees that have not signed up that they can still sign up for future pay periods.

Day 43

Send the "live" payroll information to your ODFI.

Day 45

Employees receive their first Direct Deposit payroll payments.

SOURCE: CCH Incorporated is a leading provider of information and software for human resources, legal, accounting, health care and small business professionals. CCH offers human resource management, payroll, employment, benefits, and worker safety products and publications in print, CD, online and via the Internet. For more information and other updates on the latest HR news, check our Web site at

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

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