Direct Deposit of Payroll
In order to improve customer service and reduce the customer and banking costs inherent in paper transaction processing, the banking industry has developed an electronic means of transferring funds, the central component of which is the Automated Clearing House (ACH).
The ACH is a computer facility, usually operated by a Federal Reserve Bank, which facilitates the paperless exchange of financial transactions between participating financial institutions. These ACHs interconnect, making possible the national interchange of electronic transactions.
Every participating ACH financial institution is assigned a unique number that can be found on the bottom left of a personal check or deposit slip (for checking or savings accounts). This number is the Transit-Routing (TR) number, which identifies the bank where that account is maintained. Direct Deposit is the automatic credit of a recurring payment (such as net pay) into an individual's account at a participating financial institution. Instead of distributing checks, the disbursing organization sends a magnetic tape (or in some cases, a diskette) or transmits payment data via modem to the bank, where the transactions are electronically processed and forwarded to the ACHs for distribution to the receiving depository institutions. Some of the advantages of using Direct Deposit are:
- No trips to the bank or waiting in lines;
- No lost or stolen checks;
- Deposits are made even if the employee is sick or away; and
- Savings in postage and time.
This topic includes general requirements for using Direct Deposit, a step-by-step procedure for initializing and using Direct Deposit, and the record layouts of the bank transmission file.
- Related Topics:
- Data Transmission
To improve the speed associated with submitting payroll data, a method of communicating at high speed via computers using ordinary telephone lines, called data transmission, is available at most participating banks. - Requirements
There are several requirements you must meet in order to use the Direct Deposit feature: - Summary of Required Steps
The following steps are broken into two main groups: initialization and periodic procedures. Initialization steps are normally done once, and then performed as needed, whereas periodic procedures take place each time payroll data is sent to the bank. - Periodic Procedures
There are several steps in performing periodic procedures. - Data Transmission
To implement data transmission, you must have a modem, communications software, and a phone line through which outgoing calls can be made. - Special Hints
There are few suggestions when you deal with Pay Frequency and One Cent Credits. - Entry Detail Record Format
Entry Detail Records contain information that connects the entry to the individual; for example, bank account number, identification number, name, and the amount of the deposit. - Company/Batch Header Record Format
The Company/Batch Header Record identifies the originating company and briefly describes the prearranged credit; for example, REG SALARY indicates the reason for the transactions originated by your organization. - File Header Record Format
The File Header Record designates physical file characteristics and identifies the immediate destination (for example, bank name) of the entries contained within the file or within the transmitted batched data. - Company/Batch Control Record Format
The Company/Batch Control Record contains the counts, sub- (or "hash") totals, and total dollar amounts for the preceding Detail Entries within the batch. - File Control Record Format
The File Control Record contains dollar, entry, and sub- (or "hash") total accumulations from the Company/Batch Control Records in the file.