ACH (Automated Clearing House)
Direct Payroll Processing Program
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What is (ACH) Automated Clearing House Direct Payroll Processing Origination?
ACH processing is a positive and practical step towards the "paperless society" we have all read so much about.
Instead of issuing an Payroll Check to your employee, and they in turn negotiating/depositing their check at a bank,
an electronic based ACH credit transaction (from your company) is originated and sent to Progressive Bank and then
forwarded by the Bank through the Federal Reserve Bank’s secured ACH processing system to the intended
receiver/employee.
The ACH Network is a highly reliable and efficient nationwide electronic funds transfer system governed by the
(National Automated Clearing House Association) NACHA OPERATING RULES, which provides for the clearing of
electronic payments from/to participating financial institutions. The Federal Reserve acts as an ACH Operator or
central clearing facility, through which financial institutions (Progressive Bank) transmit/receive ACH based entries
generated/authorized by originators (your company).
Originator - (Your Company)
A corporation or other entity that initiates entries into the Automated Clearing House
Network according to arrangements with a Receiver (employee).
(ODFI) Originating Depository Financial Institution - (Progressive Bank)
A participating financial institution that transmits ACH entries at the request of an
Originator to the ACH Network/ACH Operator.
ACH Operator - (Federal Reserve Bank)
An ACH central clearing facility operated on behalf of participating financial
institutions, to/from which financial institutions transmit/receive ACH entries.
(RDFI) Receiving Depository Financial Institution - (Employee’s Bank)
A participating financial institution that receives ACH entries from an ACH Operator and
posts the entries to the accounts of its depositors (Receivers).
Receiver - (Employee)
An individual or other entity who has authorized an Originator to initiate electronic ACH
entries to their depository account held at their RDFI.
An ACH Payroll Processing based transaction generates a “debit/withdrawal” to be made to your payroll
checking account held at Progressive Bank (ODFI), along with “credits/deposits” to be made to your employees
depository accounts at their participating financial institution (RDFI) on the pre-determined business day.
What Does it Take to get Started?
Your electronic ACH transaction file must be compatible/formatted with the standards set forth for all ACH
based transactions through (NACHA) National Automated Clearing House Association. This can be obtained by
either your current in-house processing software (you need to verify this file format is available through your
vendor) or by using a third-party software from an ACH transaction based company.
Your ACH transaction file must be encrypted for security purposes onto a diskette and sent to Progressive Bank.
You also have the option of transmitting the ACH file (electronically) from your PC to a bank secured PC.
Each employee that will participate in this payroll program will need to enter into an agreement by filling out an
“Authorization Form”, giving you the permission to credit/deposit funds from their account at their individual
(participating) depository financial institution.
Your company (optional) should transmit what is called a (PRE-NOTE) for every employee participating. This
transaction would be sent at least ten (10) days prior to the first payroll period for that employee. This is basically all
of the information (excluding the dollar amount) needed to pay your employee. This lets your company and the
entire ACH system, verify that the information your employee has given you for this transaction is correct (their bank
name, routing number, and account number).
What are some of the Benefits and Advantages of Direct Payroll Processing?
Your company along with your employees both will benefit from this easy to use program. It is a "Win/Win"
situation.
Employee
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Saving Time Cashing Payroll Checks - your employees just enter the amount in their check book (no
depositing payroll checks, or running to the bank to cash them).
Availability of Funds - your employees will be able to write checks against the payroll deposited amount
the day of the transaction. (Based on Employee’s Individual Bank’s Policy)
No More Payroll Deposit Worries - whether your employee is on a trip, out of town, or sick at home,
their payroll will always be deposited automatically (on the predetermined day).
Eliminating Late Payroll Deposits - gives employees confidence that their payroll will be received on
time.
Company
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Enhancing Employee Service - your employees will appreciate having a payroll option that is convenient
and easy to use.
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Improving Upon Your Image - offering direct payroll shows your employees that you're employee
oriented and technologically savvy.
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Cash Flow and Payroll Accounting - your payroll deposits are more predictable and reliable, the result,
more accurate cash flow forecasting.
Increasing Your Efficiency - every employee on direct payment helps you eliminate the manual process of
handling checks and improves the efficiency of your operations. (You will still continue to provide employee
with a payroll stub)
Excellent customer based payroll services is good business. Progressive Bank recognizes this and strives to
deliver additional options to you and your employees by offering this service to you. You can enhance your current
company’s payroll service and win over your employees by adding the ACH program, "Direct Payroll Processing" to
your menu of payroll options.
If you are ready to begin offering this program to your employees, or have any further questions with
the program, please feel free to contact your PROGRESSIVE BANK personal representative.