What Is a Payroll Clearing Account?

Payroll clearing accounts are a beneficial way for companies to manage their payroll process. Large companies can automate their payroll check process using a PCA and direct deposit, allowing less time for checks to clear from their bank account. PCAs also protect the integrity of a company’s main bank account.

Definition

Payroll Process

Account Review

Advantages

Disadvantages

PCA payroll clearing may be unsuitable for small and midsize companies that have fewer employees. If the company issues payroll using live checks, tracking any remaining balance in the PCA can be time consuming. Some companies only keep the payroll balance in the PCA for a few days; employees attempting to cash checks after this date will be unable to do so. This creates more work for the accounting department by re-issuing checks for previous payroll periods.

References