Automated Clearing House(ACH)

Meaning & Definition

An Automated Clearing House (ACH) is a type of digital payment system created to facilitate large numbers of transactions between bank accounts. It is very often used in payroll and human resources to transfer employees’ salaries, reimbursements, and benefits directly to the employees’ bank accounts. ACH allows for secure, automated, and paperless payment without the need for cash or cheque payments.

Business & HR Significance

• Provides for fast and safe distribution of salaries to employees.
• Reduces the human effort required to process payroll and the potential for error.
• Capable of processing “Bulk” payments such as Salaries, Bonus payments, Incentive payments, and Reimbursement payments.
• Increases the reliability of payments to employees and increases employee satisfaction.
• Helps the organization transition to a cashless payroll system, as well as automating payroll activities through the use of technology.

Compliance & Policy Considerations

ACH payments are regulated according to banking and digital payment regulations, including the regulations governing the ACH network.

Employers will need to:

• Have accurate employee banking information and consent from employees.
• Safeguard payroll and financial data.
• Process payrolls in accordance with their payroll schedules.

Internal payroll and finance policies generally define the procedures for using ACH payments as well as the appropriate levels of control of ACH payments.