How to Set Up Direct Deposit for Your Employees (Without the Headaches)

Why Direct Deposit Is Worth the Setup

Paper checks cost $4–$20 each to process when you factor in printing, signing, and distribution. Direct deposit costs pennies. More importantly, employees prefer it — 93% of US workers receive their pay via direct deposit, according to the American Payroll Association.

What You Need to Get Started

From Your Bank

• A business checking account
• ACH origination capability (most business accounts include this; some charge a monthly fee)
• Your company's routing number and account number

From Each Employee

• A completed direct deposit authorization form
• Their bank's routing number (9 digits, found on the bottom left of a check)
• Their account number
• Account type (checking or savings)

The Setup Process

Step 1: Enable ACH origination with your bank

Contact your business bank and confirm you have ACH origination enabled. Some banks require a separate application and may run a credit check.

Step 2: Collect employee banking information

Have each employee complete a direct deposit authorization form. This is a legal authorization for you to deposit funds into their account — keep it on file.

Step 3: Enter banking info into your payroll system

Enter each employee's routing and account numbers. Double-check every digit — a transposed number will cause the deposit to fail or land in the wrong account.

Step 4: Run a prenote (optional but recommended)

A prenote is a $0 test transaction that verifies the account information is valid before you send real money. Most payroll systems support this. It takes 1–3 business days to confirm.

Step 5: Set your processing lead time

ACH transfers typically take 1–2 business days. If you pay on Friday, you need to submit payroll by Wednesday or Thursday. Know your bank's cutoff time.

Handling Employees Without Bank Accounts

Approximately 5% of US households are unbanked. Options for these employees:

• Payroll debit cards: Load pay onto a prepaid debit card. Employees can use it anywhere Visa/Mastercard is accepted.
• Paper checks: Still legal everywhere, just more expensive.
• Cash pay apps: Some states allow payment via apps like Venmo or Cash App, but verify your state's requirements first.

Common Problems and Fixes

Returned ACH: The deposit bounced back. Usually caused by a closed account or wrong account number. Contact the employee immediately and reissue via check while they provide updated banking info.

Wrong account: If funds land in the wrong account, contact your bank immediately. Recovery is possible but not guaranteed — prevention (double-checking numbers) is far better.

Timing issues: If a holiday falls on your pay date, the deposit may arrive a day late. Communicate this to employees in advance.

How Ogo Ops Handles This

Ogo Ops stores employee banking information securely and processes direct deposits automatically on each payroll run. The platform supports same-day ACH for last-minute payroll runs and sends employees a pay stub notification when their deposit is on the way.