Payroll Direct Deposit is a system of distributing employees’ earnings directly to their checking or savings accounts. Direct deposit relies upon the use of a standardized electronic file—called an ACH file—that summarizes basic
information about the account your company uses for Payroll transactions, and it includes basic information about the employees’ accounts.
You can use Payroll Direct Deposit to generate the information you need to have Payroll funds automatically deposited into employees’ accounts at their financial institutions. You can customize the information that is given to your financial institution to meet both your company’s needs and the financial institution’s needs.
Each employee’s pay can be distributed between up to twelve bank accounts. There are two types of direct deposit accounts: direct deposit accounts—the ones most of your employees will use—and deduction direct deposit accounts.
Deduction direct deposit accounts should be used only if you have employees who want a portion of their pay sent to a direct deposit account and the remainder paid to them in a paycheck. For more information about the differences between regular direct deposit accounts and deduction direct deposit accounts, refer to Regular vs. deduction direct deposits on page 189.
When you process a pay run, you can print Payroll checks in one print job, then print Payroll Direct Deposit earnings statements in another. This lets you conserve your check stock for printing actual checks.
This information is contained in the following sections:
• Regular vs. deduction direct deposits
• Remainder of net
• Payroll Direct Deposit prenotifications
• Direct deposit exceptions
• Setting up Payroll Direct Deposit
• Entering auto-settle line information
• Setting up Payroll Direct Deposit security
Regular vs. deduction direct deposits
A deduction direct deposit account is set up as a link to a Payroll deduction, rather than as a separate Payroll Direct Deposit account entry. You should use deduction direct deposit only if an employee requests to have some Payroll funds deposited to a direct deposit account and the remainder of his or her earnings paid with a check.
The following table explains the differences between a regular direct deposit and a deduction direct deposit.
Remainder of net
Payroll calculates the net wages for an employee’s earnings, which can then be distributed to one or more direct deposit accounts. If all direct deposit accounts are paid and the net wages have not been fully exhausted, the remaining amount is called the remainder of net.
• If the employee is using regular direct deposit accounts, the remainder of net will be added to the amount paid to the account indicated by the Remainder of Net Line Number on the Employee Direct Deposit Maintenance window.
For example, suppose Jane’s net wages are $1,200. She has two direct deposit accounts:
• Line 1 is a $500 Direct deposit to a savings account.
• Line 2 is a $500 Direct deposit to a checking account.
$1200 - $500 - $500 = $200
The Remainder of Net Line Number is 2, her checking account. The remainder of net is $200. This amount will be added to Jane’s checking account. The total deposits will be $500 to savings and $700 to checking.
• If the employee is using deduction direct deposit, those “deductions” are processed in Payroll just like any other Payroll deduction. The amount for a deduction direct deposit is determined by Payroll and is not changed by Payroll Direct Deposit. If an employee is using deduction direct deposit, the employee’s net wages—the amount left after deductions are paid—are paid with a
paycheck. For more information, refer to Chapter 25, “Deduction Direct Deposit setup.”
Regular direct deposits Deduction direct deposits
Effect on wages Sends net wages to direct deposit accounts.
Reduces net wages.
Setup location Employee Direct Deposit Maintenance window.
Employee Deduction Maintenance window.
Payment order Paid in the order they appear in the Employee Direct Deposit Maintenance window, after any deduction direct deposits.
Paid first.
Remainder of net pay
Remainder of net pay over the amount of deductions and direct deposits will be sent to the direct deposit account indicated by the Remainder of Net Line Number field in the Employee Direct Deposit Maintenance window.
Net pay over the amount of the direct deposits cannot be sent to any direct deposit account, but is paid with a “real” check.
Checks If an employee has “regular” direct deposit accounts, any net pay over the amount will be sent to the direct deposit account specified in the Remainder of Net Line Number field;
the employee might get a voided check or a direct deposit earnings statement.
If an employee has only a deduction direct deposit account, any net pay over the amount of the deductions will be paid with a “real” check.
Payroll Direct Deposit prenotifications
A prenotification or prenote is a test run of direct deposit information to help you verify the financial institution and employee account numbers you’ve entered in Payroll Direct Deposit. If you’re using deduction direct deposits, the effect of prenotes is slightly different. Refer to Chapter 25, “Deduction Direct Deposit setup,”
for more information.
After you’ve entered an employee’s Direct Deposit preferences, you might be required by your financial institution to process one or more prenotifications to verify the information in the ACH file. You’ll need to check with your bank or credit union’s guidelines and process as many prenotes as required when an employee adds an account to his or her direct deposit setup.
Each time an employee begins using Direct Deposit, you’ll probably be required to complete a prenotification for that employee’s distributions. Check with your financial institution for more details about particular requirements.
If you generate an ACH file that includes an employee account that has prenote status, the ACH file line item will include financial institution and account numbers, but a zero dollar value.
Payment to employees who have entries that are in prenote status will depend on whether all or some of the employee’s accounts have prenote status:
• If all of an employee’s accounts have prenote status, the employee will not be paid by Direct Deposit. A check will be generated for the employee instead.
• If the employee has a combination of active and prenote status accounts, the employee’s distributions to the active accounts will be completed. The
remainder of net will be deposited in a direct deposit account; it will not be paid by check.
Direct deposit exceptions
Occasionally, you will not be able to complete the direct deposit transactions that are specified by your employees. This causes an exception to your direct deposit process. Exceptions are the instances when direct deposit transactions are not completed as you might have intended. Payroll direct deposit groups exceptions into three categories:
• Insufficient Funds
• Amount Deducted, Not Deposited
• Other
Situations that might cause each of these exceptions are described here.
Insufficient funds
The employee hasn’t earned enough funds in this pay period to pay all deposit accounts.
Situation A The amount scheduled to be directly deposited to the account exceeded the net pay for the employee.
For example, suppose that Kevin’s usual net pay is $1,000, and has only one line in his direct deposit setup, directing that $600 be sent to a savings account.
During one pay period, however, his net wages are only $500. The direct deposit for that Payroll would be $500 to the savings account. This amount—even though it is an exception to a typical Payroll run—would be transferred to the account with Direct Deposit.
Situation B Funds were allocated to other direct deposit accounts or deductions, resulting in insufficient funds to pay the direct deposit account referred to in the exception entry.
For example, suppose that Maria’s usual net pay is $1,000 and she has the following direct deposit accounts set up:
• Line 1: Savings $400
• Line 2: Checking $600
During one pay period, however, her net wages are only $800. The direct deposits for that Payroll would be $400 to the savings account—since accounts are paid in the order they appear in the scrolling window—and $400 to her personal checking account. These amounts—even though they are exceptions to a typical Payroll run—would be transferred to the accounts with Direct Deposit.
Situation C The entire net pay was split by percentage between two or more direct deposit accounts and the net pay couldn’t be divided evenly.
For example, suppose that Sam’s net pay is $999.99 and he has the following direct deposit accounts set up:
• Line 1: Checking 50 percent
• Line 2: Savings 50 percent
In this scenario, $500 would be sent to the first account listed in the Direct Deposit Setup window, and $499.99 would be deposited into the second account listed.
Amount deducted, not deposited
The amount was deducted but not deposited.
Situation A A Payroll deduction was linked to direct deposit in the Direct Deposit Setup window, but when the accounts were set up for the employee in the Employee Direct Deposit Maintenance window, no link was established between the deduction and the employee’s direct deposit accounts.
Situation B A deduction direct deposit account was set to Inactive or Prenote, or was deleted in the Employee Direct Deposit Maintenance window.