Setting Up Direct Deposit for Employees and Yourself (2025)

Whether you’re managing a small hourly team or just paying yourself as a business owner, setting up direct deposit helps you save time, avoid errors, and get your people paid faster.

This guide breaks down direct deposit setup process step by step, so you can stop stressing about payday and get back to everything else on your to-do list.

TL;DR: How to Set Up Direct Deposit for Employees

• Direct deposit is the easiest and safest way to pay employees. You send their paycheck straight from your business bank account to their personal account.
• Setup requirements:
  
  • Your employee’s banking details (routing number, bank account number, and account type)
  • A secure way to enter their info (like a payroll tool or through your bank)
  • Typically, you’ll also need an authorization form
• Automate payday: Once you enter everything into your payroll provider or bank’s interface, you can start sending paychecks automatically—no paper, no problems.
• If you’re self-employed: You can use online transfers or a payroll tool to pay yourself, but make sure you follow the right tax rules for employment type (talk to an expert if you’re unsure).
• Avoid common mistakes: 
  
  • Double-check that the numbers are correct and the names match to bank records.
  • Ask your employees to verify test deposits.
  • Ensure you know the reversal window for your provider  (usually 5 business days).
  • Periodically ask employees if their  banking information has changed to avoid bounced payments.
• Payroll software like Homebase can make the whole process faster, easier, and more secure.

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What is Direct Deposit and How Does it Work?

Direct deposit is an electronic payment method that lets you transfer money from your business account into an employee’s bank account.

It works through the Automated Clearing House (ACH), a secure financial network that processes payments between banks in the U.S. The ACH handles billions of dollars in direct deposits, so you know you’re in reliable hands.

To run payroll for your team using direct deposit, enter the employee’s bank details into your payroll system or banking portal. On payday, the funds are sent from your business account to the employee’s account—no checks, no stamps, no trips to the bank, and no risk of stolen or lost money.

How long it takes for setup vs. deposit:

• The setup process can take a few days or weeks depending on your bank or a payroll provider.
• It usually takes 1–3 business days for the deposit to go through, while some providers offer next-day or even same-day payroll.
• You can schedule your direct deposits through a payroll provider like Homebase so payday is always on time.
• Check with your provider so you know what setup and transfer times to expect.

Want to know more about how payroll works? We have a step-by-step payroll guide you can check out.

What Do You Need to Set Up Direct Deposit?

To set up direct deposit, you need accurate employee bank account details, a signed authorization form (or digital authorization from your employees), and a payroll or banking system to handle the transfers.

Here’s what that means:

• Employee bank information: Routing number, account number, and whether it’s a checking or savings account.
• Authorization form: A signed document (digital or paper) where the employee permits you to send payments to their bank account. Some payroll providers include this authorization in their setup process, so when employees enter their own banking info, that functions as their authorization.
• Payroll software or bank access: You’ll need a way to actually input and process payments, either through payroll software like Homebase or your business banking platform.

How to Set Up Direct Deposit For Employees in 5 Easy Steps

Setting up direct deposit for your team requires a keen eye and lots of numbers, but once the tedious part is done, your payroll process will be much simpler and faster.

Here’s the step-by-step guide for how to set up direct deposit for your employees:

1. Collect bank account details 

Ask employees for their:

• Bank routing number (usually 9 digits)
• Account number (usually 8–12 digits but can be longer)
• Account type (checking or savings)

Your team can get this info from a voided check, bank statement, or their banking app. Accuracy is key here. Even one wrong digit can mean a delayed or bounced paycheck. So, make sure you or your employee—whoever is doing the typing—double-checks all the numbers.

Pro tip: Remind your team to make sure their account type accepts direct deposits because not all accounts do. For example, direct deposit is not available for Bank of America’s SafeBalance Banking® for Family Banking accounts.

2. Have employees fill out a direct deposit authorization form

Before you can transfer money to their account, your employee needs to give you written permission. A direct deposit authorization form includes their contact info, bank details, and a signature confirming they’re okay with electronic payments.

You can find blank forms from your payroll provider or bank, or download one from online HR resources.

If your payroll provider doesn’t require a form because employees will be filling out their own direct deposit information, then you won’t have to worry about a form.

3. Enter info into payroll software or bank interface

Once you have the details you need (and you’ve double-checked it!), log in to your payroll software or banking portal. Most tools have a section where you can add new employees and input their payment details.

Homebase makes this easy with built-in employee profiles. Once you enter the info once, it’s stored securely and ready for every future payroll run. Plus, you can easily go in and update things if a team member needs to change their direct deposit information in the future. Pro tip: Double-check that your employees’ names match their bank records exactly. A mismatch could end up in a rejected or delayed transaction.

4. Verify account with a test transaction (if needed)

Some banks or payroll systems will send a small test deposit (often under $1) to confirm the account works. The employee just needs to check their balance and confirm the amount.

Not all systems require this, but it’s a good safeguard if you're setting up direct deposit for the first time. This way, when actual payday comes around, everything will be ready to go without any hiccups.

5. Process payroll with direct deposit enabled

Once everything’s verified, you’re ready to roll. Just run payroll like you normally would, and your payroll system will automatically send payments to each employee’s account on payday.

How to Set Up Direct Deposit to Pay Yourself

Whether you’re running a one-person show or sharing ownership with partners, paying yourself through direct deposit helps keep your business and personal finances organized. And it can save time come tax season, too.

But how you pay yourself depends on how your business is structured.

Sole proprietors and single-member LLCs:

If you operate as a sole proprietor or a single-member LLC, you’re not considered an employee. That means you won’t run payroll for yourself or issue a W-2. Instead, you’ll take what’s called an owner’s draw—money you pull from business profits.

You can set this up in two ways:

1. Manual transfer via your online banking from your business account to your personal account. It’s fast and flexible, but you won’t get pay stubs or calculate taxes, so it’s up to you to track income and set aside money for self-employment taxes and estimated quarterly payments.
2. Use payroll software to help automate your draw schedule and keep records organized.

Partnerships and multi-member LLCs:

In a partnership or multi-member LLC, each owner usually takes a share of the profits based on the partnership agreement. Like sole proprietors, you don’t get a W-2 or go through payroll. Instead, you’ll take distributions, and your share of the income will pass through to your personal tax return.

Again, you can transfer funds via online banking or use accounting or payroll tools to keep your payouts consistent and documented. Either way, you should keep records and plan for taxes.

S-Corp and C-Corp owners:

If you have S-Corp or C-Corp status and actively work in the business, the IRS considers you an employee. That means you must pay yourself a “reasonable salary” through payroll and issue a W-2.

In this case, you need to run payroll, calculate withholdings for federal and state income tax and other deductions (like retirement and health insurance), and file the appropriate forms each quarter. 

A payroll tool like Homebase makes this easy by automating those tasks and helping you stay compliant.

Homebase lets you run payroll with direct deposit, generate pay stubs, calculate taxes automatically, and store everything securely in one place, so you can pay yourself and your team on time, every time.

Want a one-stop solution that handles payments, compliance, onboarding, and time tracking? Try Homebase’s online payroll tools for free.

A note on taxes and compliance:

Whatever your business structure, how you pay yourself has tax implications. Here’s the gist:

• Owner’s draws don’t require tax withholdings, but you still owe self-employment taxes and may need to pay quarterly estimates.
• Payroll wages require withholdings and regular tax filings.
• The IRS expects S-Corp and C-Corp owners to pay themselves reasonable compensation if they’re working in the business.

Not sure what applies to you? It’s always a good idea to check in with a tax professional or CPA. They can help you stay compliant and avoid surprises at tax time.

Can You Set Up Direct Deposit Without Going to the Bank?

Yes, you can absolutely set up direct deposit without making a trip to the bank. These days, most banks and payroll platforms let you handle everything online. Employees can fill out their direct deposit forms digitally, and you can run payroll from your laptop—or even your phone.

How to link bank accounts using online banking if you’re self-employed

If you’re self-employed, most business bank accounts let you link your personal account right from your online dashboard. You’ll just need the routing number and account number of your personal checking or savings account.

Once you’ve linked your accounts, you can schedule recurring transfers from your business account to your personal one—think of it like building your own mini direct deposit system. It’s fast, secure, and saves you from writing checks or moving money manually every payday.

What Numbers Do You Give Your Employer for Direct Deposit?

To get paid via direct deposit, employees need to provide three key numbers:

• Routing number: Usually a 9-digit code that tells your employer’s bank where to send the money
• Account number: Usually 8–12 digits (sometimes more) that tells the bank exactly where to deposit the funds
• Account type: Checking or savings (not a number but still important!)

You can find this info:

• On the bottom of a physical check
• In your bank’s mobile app
• On your online bank account after logging in

Mistakes to Avoid When Setting Up Direct Deposit

Setting up direct deposit for your team should save time, not cause headaches. Here are a few common mistakes small business owners make (and how to avoid them):

1. Rushing the numbers

It only takes one wrong number in a routing or account number to delay a paycheck—or worse, send it to someone else’s account. Double-check that everything is correct before hitting submit. Encourage your employees to do the same when they’re entering their own info.

2. Forgetting to verify test deposits

Some banks or payroll platforms send a small test deposit (usually under $1) to confirm an employee’s account. If the employee doesn’t verify it promptly, it can delay the entire payroll run. Give them a heads-up and remind them to check their bank account.

3. Missing the reversal window

If a payment goes to the wrong account or is issued for the wrong amount, you usually have five business days to submit a reversal. Don’t wait. As soon as you notice a mistake, contact your payroll provider or bank to correct it.

4. Not matching names to bank records

The employee name you enter needs to match what’s on their bank account. A name mismatch can cause the payment to be rejected, even if the numbers are correct. When in doubt, ask employees to confirm how their name appears with their bank.

5. Skipping regular updates

Banking details can change. If someone closes their account or switches banks and forgets to tell you, their paycheck could bounce. Set a reminder to check in with your team occasionally. Or better yet, use a payroll tool like Homebase that lets employees update their own info securely.

Direct Deposit Forms: What They Include and Where to Get One

A typical direct deposit form includes:

• Your name and contact info
• Your bank name, routing number, and account number
• A checkbox for account type (checking or savings)
• A signature giving your employer permission to deposit funds

You can usually get a direct deposit form from:

• Your employer’s HR portal
• Your payroll provider
• Your bank’s website
• Your state labor department website

Here’s a sample direct deposit form to help you see what’s typically included.

Make Direct Deposit Effortless with the Right Tools

Setting up direct deposit manually is tedious, though not hard. But managing it at scale can get tricky fast. That’s where a smart payroll tool like Homebase can make a big difference.

Plus, when only two payroll errors can make 49% of employees think about leaving their jobs, a reliable system like direct deposit can help you keep your team happy.

With Homebase, you get:

• Built-in direct deposit for every employee
• Secure onboarding tools that let team members enter their info themselves
• Automatic tax filings and pay stubs
• Easy-to-use scheduling and time tracking that syncs with payroll

Thousands of small businesses already trust Homebase to handle everything from payroll to scheduling and labor law compliance. And the best part? You can try it for free today and see how setting up direct deposit can help you and your team.

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FAQs About Setting Up Direct Deposit

What is the difference between direct deposit and ACH?

Direct deposit is a type of ACH (Automated Clearing House) transaction. ACH refers to the broader network used for all kinds of electronic transfers. Direct deposit is just one type, specifically for payroll and government payments.

Can I have my paycheck split between two accounts?

Yes, it’s possible to have your paycheck split between two accounts depending on your payroll system. Some systems let you divide your paycheck between two or more accounts. You’d just need to give your employer the banking information for each.

For example, if you wanted part of your pay to go to your checking account and the other part to your savings account, Homebase lets you split your paycheck by percentage or a fixed amount.

How long does it take to start receiving direct deposit?

Once you’ve submitted your bank details and authorization, it can take a few days to weeks for you to start receiving direct deposits. Some providers offer faster setup, but delays can happen if information is incorrect or missing.

Is direct deposit safe?

Yes, direct deposit is safe, and it’s actually safer than paper checks, which can be lost or stolen. ACH transfers are encrypted and monitored for fraud, and your bank will have protections in place if anything goes wrong.

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