How the Memorial Day bank holiday affects payroll and direct deposits

Understanding the Memorial Day bank holiday schedule

Federal Reserve banks observe multiple federal holidays throughout the year, including Memorial Day. On these days, all Federal Reserve banks and branches close. This halts the services they provide.

Most consumer-facing banks follow the same Memorial Day schedule, so they will also close. Services affected by the closure include ACH transfers, wire transfers, mobile and regular check deposits, and internal bank transfers. However, everyday transactions such as debit card payments and ATM withdrawals continue to function normally.

Dates for the current and future Memorial Day Bank Holiday include:

To avoid unwanted direct deposit delays, it’s a good idea to plan ahead for holiday bank closures. Initiating payroll early can get your team’s funds into their bank accounts before the Memorial Day weekend starts.

How the holiday affects direct deposit timing

ACH payroll direct deposits generally involve four or five parties:

• the employer
• a regional Federal Reserve Bank
• one or two consumer-facing banks
• and an employee.

The ACH process begins when an employer initiates a payment through their bank. From there, the bank passes it to the ACH network, where the payment is settled by a Federal Reserve Bank.

After settling the payment, it’s passed to the employee’s bank and deposited into their individual account. The system is efficient — ACH direct deposits are often processed within the same business day. However, holidays like Memorial Day slow it down.

It’s unlikely an ACH direct deposit will hit on Memorial Day due to closures. No employees are available to oversee ACH processing at Federal Reserve Banks, which delays settlements. And workers at commercial banks usually have the day off, too.

That means if your usual payday falls on Memorial Day, your employees may receive their funds a day or two after the holiday, unless your organization initiates the direct deposit process early.

Planning your payroll run around Memorial Day

As an employer, you want your team to get their paychecks on time. Delaying pay due to a federal holiday can have negative repercussions for workers who depend on their paychecks for rent, food, and other expenses. It may also reflect poorly on your organization’s reputation.

Fortunately, there is a way to get employees their paychecks on time: early processing. If you submit ACH payroll direct deposits two or three days ahead of schedule, your team can receive their pay on the Friday before Memorial Day.

For best results, plan to initiate ACH payroll direct deposits on the Wednesday or Thursday before Memorial Day. This allows enough time for the banks and Federal Reserve to transfer and settle your employee’s earnings for a Friday payment.

Use this quick-reference guide to keep your holiday payroll on track:

Best practices for holiday payroll management

Processing payroll before the Memorial Day Bank Holiday doesn’t have to be hard. Take these steps for a smooth, easy process.

1. Check bank deadlines

Ask your bank about their Memorial Holiday ACH deadlines. You want to know your financial institution’s cutoff date and time to submit ACH direct deposit information, so your employees receive their funds on Friday. While a Wednesday or Thursday submission will usually work, banks may have a specific time deadline, such as 11:00 am on Thursday morning.

2. Communicate with staff

Let your employees know when they can expect their pay to arrive before Memorial Day. That way, they can plan their finances around their actual pay date, and they won’t worry about potential delays.

Keep in mind that once you institute a holiday direct deposit policy, you’ll want to stick with it for your entire team. Avoid switching between early and delayed holiday payments, or paying some workers early and others late. This can confuse employees and potentially result in legal issues.

3. Double-check software settings

Automated payroll solutions take much of the manual work off your hands. They calculate gross pay, taxes, and other deductions for you, eliminating headaches. And if you have multiple payroll schedules, they can handle that, too.

However, federal holidays can throw a wrench into automated payroll processing if your platform’s settings are incorrect. For example, if the platform usually processes payroll on Friday, you’ll want to change the date to Wednesday or Thursday to avoid delays.

Other federal holidays to keep on your radar

Memorial Day is just one of the US federal holidays. There are 10 others throughout the year. When they occur on your payday, you should apply the same principles to arrange early pay.

Keep in mind that holidays can fall on any day of the week. Federal holidays that fall on a standard Monday through Friday business day are observed on that day. But if a holiday occurs on a Sunday, then Federal Reserve banks observe it on Monday.

Holidays that fall on a Saturday don’t affect a Federal Reserve Bank’s operating hours. It will open on the preceding Friday as normal.

Most consumer-facing banks follow the same holiday schedule as the Federal Reserve. However, some may observe Saturday holidays on a Friday, depending on the bank’s policies.

You can track bank holidays using the OnPay pay run schedule. The list of upcoming federal holidays for the next four quarters gives you plenty of time to organize and adjust your payroll schedule.