Direct deposit payroll for small business employers: what payroll direct deposit software has to get right about timing, authorisation and the fraud that targets bank details

Setting it up safely

1. Establish the lead time and work backwards. Funds usually have to be submitted days before pay day. Fix your cut off from that date rather than from convenience, and make it visible to everybody who submits hours.
2. Require confirmation for any bank detail change. Out of band, to a known contact, by somebody other than the person who entered it. This one control prevents the fraud that costs small employers most in this area.
3. Keep written authorisation for each employee. Consent to pay by deposit, and the account details as provided. When a payment goes astray, the authorisation is what shows the instruction you acted on.

Timing, which decides your calendar

Standard transfers settle on a schedule, and faster options usually cost more per run. A small employer paying monthly rarely needs the fast option; one paying weekly with variable hours may find the lead time is the binding constraint on how late timesheets can arrive.

Ask what happens when a pay day falls on a holiday, and whether the product moves it forward automatically. Getting that wrong once produces a week of complaints and is entirely avoidable.

The fraud this enables, and the control that stops it

The pattern is consistent: a message that appears to come from an employee asks for their pay to go to a new account, usually just before a pay run and usually with a plausible reason. The money leaves on pay day and is gone by the time anybody notices.

The defence is procedural rather than technical. Confirm every change by a channel you already had, never one supplied in the request, and have a second person approve. Products that support an approval step on bank detail changes are worth choosing for that alone.

Employees without a suitable account

Some people do not have an account that accepts deposits, and requirements about whether you may insist vary by jurisdiction. Pay cards and cheques remain the usual alternatives and both carry their own rules about fees and choice.

Whatever alternative you offer, document the choice as the employee's. This is one of the areas where employers create liability by being helpfully directive rather than by being negligent.

Common questions

Can we require direct deposit?

It depends on where your employees are, and several places require that an alternative exists or that the employee consents. Check before making it a condition.

How far ahead must payroll be submitted?

Usually a few business days for standard transfers. Fix your cut off from the bank's timetable rather than your own preference.

What if a deposit fails?

Have a stated fallback, because it will happen. The common cause is a closed account, and the employee usually finds out before you do.

Who should be able to change bank details?

As few people as possible, with a second person confirming. This is the single most attacked field in small business payroll.

Coverage by country

• Employer of record vendors covering Singapore
• Employer of record vendors covering Mexico
• Employer of record vendors covering Spain
• Employer of record vendors covering Colombia
• Employer of record vendors covering United Kingdom
• Employer of record vendors covering France
• Employer of record vendors covering Hungary
• Employer of record vendors covering New Zealand