Direct deposit payroll for small business: choosing direct deposit providers

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 authorization for each employee. Consent to pay by deposit, and the account details as provided. When a payment goes astray, the authorization is what shows the instruction you acted on.

Direct deposit services for small business: the three routes

Most small employers get direct deposit in one of three ways. The common one is payroll software or a payroll service that calculates pay and taxes and sends the deposits in the same run. The second is a PEO, which runs payroll and deposits as part of a co-employment bundle. The third is originating the transfers yourself through your business bank's ACH service and calculating pay elsewhere, which leaves the tax filing and the reconciliation to you.

For a small business the first route is usually the simplest direct deposit payroll system, because the deposit amounts come straight from the pay calculation and nobody retypes a net pay figure into a bank portal. Whichever direct deposit providers you shortlist, compare the funding lead time, whether a faster option exists and what it costs, and whether changes to an employee's bank details need a second approval.

Cost of direct deposit for small business

With payroll software, direct deposit is usually part of the plan rather than a separate charge, so the cost is the plan price. Gusto's pricing page, for example, lists its Simple plan at $49 a month plus $6 a month per person, with direct deposits or printable checks included on every plan. Across the US payroll products in this site's HR and payroll pricing index, the published per-person fee runs from $6 to $8 a month, most adding a monthly base fee on top.

If you originate deposits through your own bank, the price is set in that bank's business fee schedule, often a monthly charge for the ACH service plus a per-batch or per-item fee, and banks do not publish a common rate. Ask your bank for the schedule in writing, then add the time you will spend calculating pay and filing payroll taxes, which payroll software does for you.

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. Direct deposit payroll software that supports an approval step on bank detail changes is 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 checks 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

How much does it cost to set up direct deposit for my employees?

With payroll software there is usually no separate setup charge: deposits are included in the plan, and you pay the monthly base fee plus a per-person fee. Gusto lists $49 a month plus $6 per person on its Simple plan. Through your own bank, the setup and per-transfer fees are in the bank's own fee schedule, so ask for it before you commit.

What does payroll direct deposit cost per employee?

On the US payroll products this site has priced, the published fee is $6 to $8 per person a month, usually on top of a monthly base fee. Faster or same-day deposit can cost extra, so check whether the standard lead time suits your pay schedule before paying for speed.

Which direct deposit payroll system suits a small business?

One that calculates pay and taxes and sends the deposits in the same run, supports a second approval on any bank detail change, and states its funding lead time in writing. Those three points matter more than the brand on the invoice.

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

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