ACH Pulls vs. ACH Pushes: What They Mean for EORs and PEOs

A Detailed Guide on the Differences of ACH Pull and ACH Pushes for local EORs and PEOs

Automated Clearing House (ACH) transactions are the backbone of modern payroll and financial transfers. For Employers of Record (EORs) and Professional Employer Organizations (PEOs), understanding the differences between ACH Pulls and ACH Pushes is critical for efficient payroll processing, cash flow management, and risk mitigation. This article explores how these two ACH methods work and their implications for EORs and PEOs.

Understanding ACH Transactions

ACH transfers are electronic payments that move funds between bank accounts in the U.S. They are widely used for direct deposits, vendor payments, and payroll funding. ACH transactions can be classified into two main types:

• ACH Pulls: The recipient (EOR/PEO) initiates the transaction and withdraws funds from the payer’s account.
• ACH Pushes: The payer (client/employer) initiates and sends funds directly to the recipient (EOR/PEO). 

Understanding the nuances of these methods helps EORs and PEOs choose the best option for payroll processing and financial management.

ACH Pulls vs. ACH Pushes: Key Differences 

ACH Pull 

• Initiator: The EOR or PEO requests the funds from the payroll client’s account.
• Speed: May take longer since the transaction requires authorization and bank processing time. 
• Control: The EOR or PEO has more control over the timing of payments. 
• Risk: There is a potential risk of insufficient funds (NSF), leading to payment failures and payroll delays. 
• Convenience for Client: Clients do not need to manually process payments; funds are automatically withdrawn based on payroll schedules on EOR and PEO request.
• Chargebacks: There is a risk of chargebacks if the transaction is disputed, which can complicate cash flow management. 
• Bank Fees: Some banks charge fees for ACH Pull transactions, which can add up for employers and EORs. 

ACH Push

• Initiator: The employer/payroll client sends funds to the EOR or PEO.
• Speed: Usually faster since the employer directly transfers the money.
• Control: The payroll client/payer maintains full control over when the payment is made.
• Risk: Reduces the risk of NSF since the transaction occurs only when funds are available.
• Predictability for EORs and PEOs: Ensures payroll funding is received only when the employer has the necessary funds.
• Manual Process: Requires employers to take action for each payroll cycle, increasing administrative burden.
• Transaction Costs: While generally lower in cost than ACH Pulls, some banks or payment processors may still impose fees. 

Feature	ACH Pull	ACH Push
Who Initiates?	EOR/PEO	Client/Employer/Payer
Speed	May take longer	Usually faster
Control	EOR/PEO controls timing	Client controls timing
Risk	More predictable for EORs	Due to reliance on Client payers, a risk of delays in payment exists.
Chargebacks	Possible	Rare
Administrative Burden	Lower for employers	Higher for employers
Bank Fees	Possible additional fees	Generally lower fees

What This Means for EORs and PEOs

Cash Flow Management 

• ACH Pulls: Provide better predictability for the EOR/PEO but require ensuring sufficient funds are available in the employer’s account.
• ACH Pushes: Ensure that payments are fully funded but may require additional coordination with employers to prevent payroll delays.  

Risk Mitigation 

• ACH Pull Risks: If an employer’s account lacks funds, payroll payments can bounce, leading to additional fees and delays.
• ACH Push Advantages: Eliminates the risk of bounced payments since funds are sent only when available. 

Compliance & Security 

• Authorization Requirements: ACH Pull transactions require proper authorization to comply with NACHA (National Automated Clearing House Association) regulations.
• Fraud Prevention: ACH Push transactions reduce fraud risks since the payer controls the transaction.
• Data Security: Both methods require strong security measures to protect sensitive financial data.

Best Practices for EORs and PEOs 

To optimize payroll processing and financial management, EORs and PEOs should: 

• Choose the Right ACH Method: Depending on business needs, client relationships, and cash flow strategies. 
• Ensure Timely Payroll Processing: Establish clear guidelines with employers to avoid delays in funding payroll. 
• Implement Fraud Protection Strategies: Use encryption, two-factor authentication, and monitoring systems to prevent unauthorized transactions. 
• Maintain Compliance: Ensure all ACH transactions follow regulatory requirements and best practices to avoid penalties. 

Conclusion

The choice between ACH Pulls and ACH Pushes depends on the needs of the client company, its financial structure, and its partnership with an EOR or PEO. For companies working with an EOR, ACH Pulls simplify the payroll process by allowing the EOR to directly withdraw funds, but this requires confidence in account balances. In a PEO arrangement, businesses will fund payroll in advance, maintaining more control over cash flow while reducing the risk of insufficient funds. Ultimately, selecting the right ACH method should align with the client’s financial stability, payroll structure, and risk tolerance. By understanding these differences, companies can make informed decisions that ensure smooth payroll operations, compliance, and financial efficiency—whether working with an EOR or PEO.