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Excerpt From Our Online Payroll Compliance Course

Step By Step Strategies On How To Set Up a Direct Deposit Program

Step 1:
The first step in setting up a direct deposit program is to do a "needs assessment".

In other words, will any of the employees sign up for the program? If the employer finds willingness of enough employees to use the program, then they should go on to step two.

Well-conceived employee communications are critical to the successful implementation of a direct deposit program. Although, most employees will immediately recognize the benefits of direct deposit, others may be unfamiliar with or untrusting of the concept of EFT and may resist giving up their paper paychecks.

Employers may be able to conceive some of these employees to use direct deposit through communications that "demystify" the direct deposit process and give testimony to its reliability.

Communications should emphasize:

"Pay envelope stuffers" may be a great method for communicating information about direct deposit. For example, a paycheck stuffer emphasizing the convenience of direct deposit may hit home with some employees as they prepare to rush off to the bank to deposit their pay.

Other methods employers have used to communicate their programs include posters, video tapes, and special employee workshops. The employer's bank may be able to provide the employer with samples of questionnaires, marketing aids, and sign-up forms.

Step 2:
The employer must now set up the mechanics of the program with their in-house programming department or payroll service provider and their bank to set the electronic funds transfer in place.

After determining whether direct deposit is available through their current payroll system, employers should speak with several financial institutions and look for the direct deposit service that best fits the company's needs.

Here are six areas to evaluate the company's choice of banks:

There are other factors in choosing a bank, and a choice may not be available due to the employer's relationship with its financial institution. But these factors will help employers make a choice if the option of more than one bank is available.

Step 3:
With the hardware and software tested and in place, the employer must now get the employees to sign up for the program. This should be done through the employee authorization form, as discussed earlier.

Step 4:
After receiving the employee authorizations, the employer should go through the "pr-notation" or "prenote" process as discussed earlier. Processing prenotes are not mandatory but are strongly advised.

Step 5:
If all employees prenote with no problems, the employer can begin sending actual deposits through the system.

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