Direct deposit
Electronic transfer of net pay via ACH.
Definition
Direct deposit is the electronic transfer of an employee's net pay from the employer's payroll bank account into the employee's personal bank account via the Automated Clearing House (ACH) network. It is the default and dominant payment method at virtually every Fortune 500-scale employer. Direct deposit funds typically post to the employee's account by 9 a.m. local time on payday, though some banks make funds available the night before. Setup requires the employee to provide a bank routing number and account number during onboarding; most employers verify the account with a small test deposit before activating live payroll deposits.
Example
A new hire submits a voided check during onboarding to set up direct deposit.
Related terms
- Pay period — The recurring window of time covered by a single paycheck.
- Pay frequency — How often paychecks are issued.
- Payday — The calendar day wages are deposited.
- In arrears — Wages paid after the pay period ends.
- Biweekly — Every other week — 26 paychecks per year.
- Semimonthly — Twice per month on fixed dates — 24 paychecks per year.
See also
- Pay schedule calculator — convert salary to per-paycheck amount
- Pay frequencies primer — weekly, biweekly, semimonthly, monthly
- Frequently asked questions