Troubleshooting direct deposit for payroll
Learn why not all of your accounts will work for direct deposit for payroll, why your direct deposit account's status is on hold, why a direct deposit payment to an employee was rejected or failed, and how to follow up a payment cancelation.
Are there any fees for making direct deposits in a pay run?
No. Xero doesn't charge for payroll payments using direct deposit.
Why can’t I use some of the bank accounts I have connected to Xero for direct deposit?
Direct deposit is an automatic electronic transfer that allows regularly scheduled payments, such as payroll payments to be made directly from your business bank account to a payee account, such as your employee's bank account.
For direct deposit, you can only use accounts in Xero that are checking or savings accounts. Both the sender and the receiver need these types of accounts to make this work.
How can I change the phone number used for identity verification?
You'll need to contact your bank and request an update to the phone number associated with the bank account you selected for direct deposit.
Why is the direct deposit account's status on hold?
The direct deposit account status is On Hold because:
- You changed your direct deposit bank account, but the process isn't complete yet.
- The bank account in Payroll Settings doesn't match the bank account for direct deposit. Either:
- Change the Payroll Settings bank account to match the direct deposit bank account
- Change the direct deposit bank account for payroll
- You changed your company's legal name or tax ID in Xero. Xero will email you about registering for direct deposit again.
- Multiple direct deposit bank account debits failed
Why was a direct deposit payment to an employee's account rejected?
Xero can't withdraw money from your direct deposit bank account
A payment to an employee might be rejected if Xero can't withdraw the money from the organization's direct deposit account. Possibly because you have:
- Insufficient funds for payment. If Xero cancels a payment because it can't withdraw all the money from the direct deposit account, Forte will email you to collect the funds by wire. The direct deposit account status will be On Hold until they receive the funds. You'll need to keep in contact with Forte.
- Incorrect banking information. For example, wrong account or routing, the account name doesn't match the employee's, the account is closed. Once Xero is advised of the incorrect information (when the receiving bank rejects the payment), we'll let you know what's happened by email. You'll need to pay the employee by check and correct the information for future direct deposits. The funds should be returned to your account in about 5-7 business days.
The employee’s bank returns the payment
If the employee’s bank returns the payment, the employee must contact the bank to determine the issue.
You may need to:
- Update the employee's bank account details or payment method
- Pay the employee manually or by check
Funds will be returned to the company bank account that they were originally drafted from.
Xero can't stop payments once they've been issued. To stop it the payment, we recommend that you contact Forte within 3 days of issuing the payment.
Typically, payments issued to the bank remain in escrow or hold status for up to four days.
Need more help?
Click the Contact Xero Support button at the bottom of any Help page. Include your Xero organization name with your request. You'll need to log into Xero if you want to attach a file.