This all happens a couple of days before payday, so the ACH has time to sort and route the information to each employee’s bank. Direct deposit is most commonly used to transfer an employee’s salary however, it may also be used for things like tax refunds, investment dividends, retirement account payments, and government benefits like Social Security or unemployment payments.Ĭompanies send their payroll information to financial institutions, and it then gets shared with the Automated Clearing House (ACH).
Direct deposit is a popular and convenient option, but you may be wondering, how does it work? For direct deposit, employers require the payee’s bank account information or a void check in order to start making deposits.
