How to Move Payroll to a New Bank

Switching your business bank account is a big decision, and one of the most important-and sometimes nerve-wracking-parts of that process is moving your payroll. Payroll isn’t just another transaction; it’s how your employees get paid, how your business stays compliant with tax laws, and how you keep your team happy and motivated. If you’re thinking about making the switch, this guide will walk you through every step of moving payroll to a new bank account, using plain language and real-world examples. We’ll also show you how a modern banking platform like Holdings can make the process a whole lot easier, with zero fees, high-yield accounts, and integrated accounting tools.

Why Moving Payroll Matters

Let’s start with the basics: payroll is the regular payment you make to your employees for their work. This includes not just their base wage or salary, but also things like overtime, bonuses, and reimbursements. Payroll also covers all the necessary tax withholdings, like income tax, Social Security, and Medicare, plus any deductions for benefits such as health insurance or 401(k) contributions. It’s a lot to manage, and any hiccup-like a missed direct deposit or a tax filing error-can cause real problems for your business.

When you switch your bank account, you need to make sure payroll keeps running smoothly. If you miss a step, you could end up with:

• Delayed paychecks, which can upset your employees and hurt morale

• Errors in payroll tax filings, leading to penalties from the IRS or your state tax agency

• Compliance risks if you don’t follow labor laws or wage regulations

• Extra work for your accounting or HR team as they scramble to fix mistakes

The good news? With the right approach and a little planning, you can move payroll to your new bank account without missing a beat.

Step-by-Step Guide to Moving Payroll to a New Bank Account

1. Open and Prepare Your New Business Bank Account

Before you do anything with payroll, you need to make sure your new business bank account is up and running. Here’s how to get started:

• Gather the right documents, like your Employer Identification Number (EIN), business registration, and any licenses your business needs.

• Double-check your new account details-routing number, account number, and online banking login.

• Test the account by making a small deposit or withdrawal. This helps you catch any issues before payroll is on the line.

If you’re still deciding which bank is right for you, check out our guide on how to compare business banks and accounts. You’ll find tips on what to look for, from fees and APY rates to customer service and online banking features.

2. Notify Your Payroll Provider

Most businesses use a payroll service provider or payroll software to handle payroll processing. Popular options include Gusto, ADP, Paychex, and QuickBooks Payroll. If you use one of these platforms, you’ll need to update your bank account information with them.

What you’ll need:

• Your new account number and routing number

• The date you want the change to take effect (ideally, right after a payroll run)

• Any verification documents your provider requests

Pro tip: Give your payroll provider at least one or two full pay cycles’ notice before you close your old account. This gives them time to process the change and helps you avoid any missed payments.

3. Update Direct Deposit Information

If you manage payroll in-house or use accounting software like QuickBooks Online Payroll, you’ll need to update your direct deposit settings. Direct deposit is how most employees get paid these days-it’s fast, secure, and convenient for everyone.

Steps to update direct deposit:

• Log into your payroll system or accounting software.

• Navigate to the direct deposit or bank account settings.

• Enter your new bank account number and routing number.

• Run a test transaction-a small deposit or “pre-note”-to make sure everything works.

If you’re using a full-service payroll provider, they may handle this step for you. But it’s always a good idea to double-check that your employees’ paychecks will land in the right place.

4. Communicate With Your Employees

Switching bank accounts can make employees nervous, especially if they rely on direct deposit for their paycheck. Clear, friendly communication is key.

Best practices:

• Send an email or memo explaining what’s happening, when, and why.

• Let employees know if they need to do anything (usually, they don’t, unless you’re also changing the way they access pay stubs or benefits).

• Reassure your team that their pay won’t be disrupted, and give them a contact for payroll support if they have questions.

A simple message like, “We’re upgrading our banking to serve you better-no action required on your part, and your pay will arrive as usual!” goes a long way.

5. Test Payroll Transactions

Before you move your entire payroll to the new bank account, run a test payroll cycle. This can be a “dry run” with a small group of employees, or you can use dummy transactions if your payroll software allows it.

What to check:

• Are direct deposits hitting employee accounts on time?

• Are payroll taxes being withheld and paid correctly?

• Is your chart of accounts in your accounting software reflecting the new transactions?

• Are any employee benefits, garnishments, or deductions processing as expected?

Catching issues now is much easier than fixing them after a full payroll run.

6. Monitor Both Accounts During the Transition

For at least one or two pay cycles (30–60 days), keep both your old and new business bank accounts open. This gives you a safety net in case any payments, tax filings, or benefits deductions are still linked to your old account.

During this time:

• Monitor both accounts for unexpected transactions or returned payments.

• Make sure all tax payments, like payroll tax and unemployment insurance, are coming out of the correct account.

• Check your bank statements and accounting software for any discrepancies.

This is also a good time to review your account agreement and terms with your new bank, so you know exactly what to expect.

7. Close Your Old Bank Account

Once you’re confident that all payroll transactions are flowing through your new account, it’s time to close the old one.

Steps to close your old account:

• Reconcile any outstanding transactions-make sure all checks, direct deposits, and tax payments have cleared.

• Download your final bank statement for your records and for audit purposes.

• Get written confirmation from your old bank that the account is closed.

Congratulations! You’ve successfully moved your payroll to a new bank account.

Common Mistakes to Avoid When Moving Payroll

Switching banks is a big project, and it’s easy to miss a step. Here are some common mistakes-and how to avoid them:

• Delaying updates: Waiting too long to notify your payroll provider or update direct deposit info can cause missed pay cycles or errors.

• Skipping test transactions: Always run a test payroll before switching over fully. This helps you catch problems before they affect your employees.

• Not communicating with employees: Keeping your team in the loop builds trust and reduces confusion.

• Closing your old account too soon: Make sure all transactions, including tax payments and employee benefits, are coming from your new account before you close the old one.

How Holdings Makes Payroll Transitions Easy

At Holdings, we know that switching banks can feel overwhelming-especially when payroll is on the line. That’s why we’ve built a platform designed to make the process as smooth as possible for small and medium-sized businesses.

Key Features That Streamline Payroll Updates

• Integrated Financial Tools: Manage invoicing, bill pay, and accounting all in one place. No more jumping between different software or spreadsheets-your chart of accounts, payroll tax, and payment data are all connected.

• Secure Payment Management: Easily update direct deposit details and monitor payroll transactions through our intuitive dashboard.

• Zero Fees: Enjoy $0 monthly fees, no minimum balances, and high-yield deposit accounts (up to 3.0% APY). That means more money stays in your business-and in your employees’ pockets.

• Real-Time Tracking: See every payroll run, tax payment, and benefit deduction in one place, so you always know where your cash flow stands.

• Full-Service Bookkeeping: Let our experts handle the heavy lifting, from payroll processing to tax filings and regulatory compliance.

With Holdings, you get a financial partner that rewards your good business practices-instead of nickel-and-diming you with hidden fees. Learn more about our pricing and fee structure or see how we stack up against other banks in your state with our comparisons.

Payroll Transition Checklist

Here’s a handy checklist to keep your payroll move on track:

• Open and test your new business bank account

• Notify your payroll provider or update your payroll software

• Update direct deposit information for employees

• Communicate the change to your team

• Run a test payroll cycle

• Monitor both old and new accounts for at least 30 days

• Reconcile all transactions and close your old account

Frequently Asked Questions

Q: What if my payroll provider doesn’t update my bank account information in time?
A: Contact their customer support right away. Most providers like Gusto, ADP, or Paychex have dedicated payroll support teams to help with bank account changes.

Q: Can I switch payroll providers and bank accounts at the same time?
A: Yes, but it’s best to do one at a time. First, move your payroll to the new bank account, then consider switching payroll software or providers if needed.

Q: What if an employee’s direct deposit bounces?
A: If a direct deposit fails, your payroll system should alert you. Double-check the bank account information and rerun the payment. Communicate with the employee so they know when to expect their paycheck.

Q: Do I need to update my accounting software?
A: Yes! Make sure your chart of accounts and bank feeds in your accounting software (like QuickBooks or Xero) reflect your new bank account. This keeps your bookkeeping accurate for tax time and audits.

Q: How do I make sure my payroll taxes are paid from the right account?
A: Check your payroll provider’s tax settings and confirm that all payroll tax payments are debited from your new account. This includes federal income tax, Social Security, Medicare, and any state or local taxes.

Real-World Example: A Smooth Payroll Transition

Let’s say you run a marketing agency with 15 employees. You’re tired of your old bank’s fees and low APY, so you decide to switch to Holdings for better rates and integrated accounting. Here’s how your payroll transition might look:

1. You open a new Holdings account, upload your EIN and business license, and test the online banking features.

2. You notify your payroll provider (Gusto) of the new account details and set the change for the next pay period.

3. You update your accounting software-QuickBooks Online Payroll-to pull transactions from your new deposit account.

4. You send a friendly email to your team: “We’re moving to a new bank with better perks-no action needed from you, and your direct deposit will arrive as usual.”

5. You run a test payroll for two employees and confirm the deposits go through.

6. For the next month, you monitor both your old and new accounts, watching for any missed transactions or tax payments.

7. Once you’re sure everything is working, you close your old account and enjoy zero fees and higher interest on your business funds.

Final Tips for Moving Payroll

• Start early: Don’t wait until the last minute to notify your payroll provider or update your bank account information.

• Test everything: Run test transactions and check your accounting software for any errors.

• Communicate: Keep your employees in the loop and let them know who to contact if they have questions.

• Monitor accounts: Watch both your old and new accounts for at least one or two pay cycles.

• Keep records: Save all emails, bank statements, and payroll reports for compliance and audit purposes.

Switching banks doesn’t have to be stressful. With the right plan-and a partner like Holdings-you can move your payroll, improve your cash flow, and give your business the financial sidekick it deserves.

For more resources on choosing the best bank for your business, check out our state-by-state comparisons, or dive into our how-to guides for tips on everything from online banking to integrated accounting. Ready to make the switch? Learn more about Holdings’ zero-fee, high-yield deposit accounts and how we can help your business grow.

Your business hustle deserves banking that works just as hard. With Holdings, you get up to 3.0% APY, zero fees, and a platform that makes payroll and accounting a breeze. Spend less time worrying about payroll, and more time growing your business.