Payroll Funding Methods

What funding methods are available to process my payroll?

Purpose: This guide will walk you through the four funding methods available when processing payroll. Please note that certain factors may impact which funding method is available to you. 

Table of Contents:

Funding Methods

BambooHR offers four methods to fund your payroll: a two-day ACH (Automated Clearing House), a four-day ACH, a wire transfer, or a reverse wire. The difference between these funding methods primarily lies in the processing time required to transfer the funds from your company's bank account to the employees' bank accounts. Here's a breakdown of each:

1. Two-Day ACH (most common):

  • Processing Time: On the payroll due date, the ACH network will process the transaction; funds will be debited from your company account and credited to your employee's account within two business days. For example, if the pay date lands on a Friday, with a two-day ACH funding method, you must submit payroll by Wednesday to initiate this transaction. An exception for this would be if the due date lands on a bank holiday, then you would need to submit payroll the first business day before (i.e., if a holiday lands on a Monday that payroll is due, submit payroll by the Friday before). Please note that this process will happen within two business days, and oftentimes, company banks will deliver funds to your employees before the actual expected pay date. Still, funds are guaranteed by the second day.  
  • Use Case: This method is suitable for businesses that can plan their payroll in advance and want to ensure timely payment without incurring additional costs associated with same-day or wire processing.

2. Four-Day ACH:

  • Processing Time: On the payroll due date, the ACH network will process the transaction; funds will be debited from your company account and credited to your employee's account within four business days of the payroll due date. For example, if the pay date lands on a Friday, with a four-day ACH funding method, you must submit payroll by the Monday before to initiate this transaction. Now, let's say the Monday you are supposed to approve is a bank holiday; then, you would have to submit payroll on the Friday before in order to pay employees by the following Friday. Please note that this process will happen within four business days, and oftentimes, company banks will deliver funds to your employees before the actual expected pay date. Still, funds are guaranteed by the fourth day.

Our ACH partner, the National Payment Corporation (NPC), will send a request to your bank to attempt to withdraw funds on the due date of the payroll for two-day and four-day ACH methods. NPC will then initially fund the payroll to ensure the employees are always paid on time. If the payroll funds are not available to fund the payroll, that payroll will result in an NSF (Not Sufficient Funds) payroll. As a result of an NSF payroll, all your tax payments will be placed on hold, and your payroll processing access will be restricted until the NSF payroll is fully funded.

3. Wire Transfers:

  • Processing Time: Wires can be completed within two days, one day, or the same day of the expected pay date. Check out this guide for further information on how wire transfers work in BambooHR.
  • Use Case: This method is often used by businesses that need to fund payroll quickly, have last-minute changes to payroll, or reach a certain threshold amount that requires the payroll to be funded through a wire.

4. Reverse Wire Transfers: 

  • Processing Time: You can request to set up reverse wire transfers to fund your payroll with our ACH partner, NPC. With pre-approvals, NPC will withdraw payroll funds via wire directly from your company bank account upon your payroll approval. Reverse wire transfers are processed quickly, often on the same day, similar to standard wire transfers.
  • Use Case: You have the option to set up your account to always be funded via reverse wire, or you can choose a hybrid reverse/two-day ACH model. In the hybrid model, your company is set up for a normal two-day ACH, but when your pay cycle(s) for a single pay date reach the threshold that requires a wire, the system will automatically switch the pay cycle to reverse wire funding. This ensures payroll is funded quickly without the hassle of setting up a regular wire if your company reaches that threshold, which is especially helpful for those who frequently are required to wire. Please note this funding method might incur fees from your bank.  

Key Differences:

  • Speed: Wires offer the flexibility of funding payroll almost instantly as long as same-day deadlines are met. Two-day ACH is faster than four-day ACH, allowing for a shorter lead time between payroll submission and employee payment.
  • Planning: Two-day and four-day ACH methods are automatic upon setup but can shorten the amount of time you have to complete your payroll. Wire funding requires more legwork from your company and company bank to initiate, but it allows for more last-minute changes necessary for an accurate payroll.
  • Fees: Two-day and four-day ACH do not require fees to process. However, wires and reverse wires may incur fees from your banking institution, although reverse wires are typically less expensive. 

Please note: If it is your first time running payroll with BambooHR, you will likely be set to a four-day ACH or a wire. After your first payroll has been processed, you can opt to choose a two-day ACH. Work with your Payroll Project Manager or reach out to Payroll Support to ensure the correct funding method is set up. Also, note that some parameters may require you to wire a payroll. For more information, click here.