Direct deposit
Electronic payroll funding via ACH, settling typically 1–2 business days after the employer initiates the transfer.
Direct deposit is the electronic transfer of payroll funds from the employer's bank account to the employee's bank account via the Automated Clearing House (ACH) network. Standard ACH credits settle 1–2 banking days after the employer initiates the transfer; same-day ACH (available since 2016) settles the same banking day if initiated before the daily cutoff.
Federal law allows employers to require direct deposit. Several states (Pennsylvania, North Carolina, Vermont, Texas, others) prohibit mandatory direct deposit without employee consent. A handful (Connecticut, Delaware, Massachusetts) require offering an alternative. The safest small-business policy is offering direct deposit, paper check, and (optionally) a payroll card and letting the employee choose.
For the employer, direct deposit reduces per-paycheck cost, eliminates physical check distribution, and enables modern payroll software to fully automate the pay-run workflow. For the employee, direct deposit eliminates the trip to the bank and produces faster cleared funds than depositing a paper check. See direct deposit vs. paper checks for the full comparison.