A company sending an ACH payment is required to use the Company Entry Description field (which is in positions 54-63 in the Company/Batch Header Record) to provide the Receiver with a description of the purpose of each payment.

This description can be a maximum of 10 characters, and, in most cases, the value is determined by the Originator (for example: “Gas bill”, “ins. Prem.”, “Soc. Sec.”, etc.).  However, for certain types of payments, the Nacha Operating Rules require Originators to include a pre-defined description. 

Examples of descriptive statements required by the Rules include, but are not limited to, the new descriptions “PAYROLL” and “PURCHASE,” which Originators will be required to adopt no later than March 20, 2026.

For a detailed discussion of the Company Entry Description field’s requirements, refer to Subpart 3.2.2 (Glossary of Data Elements) in Appendix Three of the Nacha Operating Rules.

Use of the term “PAYROLL” is intended for descriptive purposes only, to help RDFIs identify compensation payments in their efforts to reduce the incidence of fraud involving payroll redirections.

By standardizing certain data within ACH payments for payroll and other types of compensation, RDFIs that monitor inbound ACH credits will have better information to identify new or multiple payroll payments to a particular account. A standard description for these types of payments can help support RDFI logic to provide or suppress early funds availability and support other practices intended to reduce the incidence of fraud involving payroll redirections and subsequent losses to Originators.

Originators and ODFIs transmitting entries with this entry description are required to use this general classification for fraud mitigation purposes only and without regard to how the payee is classified by the employer for legal or tax purposes. By use of the “PAYROLL” descriptor, Originators and ODFIs make no representation or warranty to the RDFI or to the Receiver regarding the Receiver’s employment status.  For questions about the tax implications of classifying a payment as employment-related income, please consult an attorney or tax advisor.

Any Originators initiating credits to consumer accounts for the payment of wages, salaries, or similar types of compensation must use the description “PAYROLL” no later than March 20, 2026.

(Examples of the types of payments that fall within the “PAYROLL” category are included below.)
 

Originators must use the new descriptor “PAYROLL” when transmitting credit entries for the payment of any income earned by an individual from employment and payable to his or her consumer account.

Below are a few examples of when to and when not to use “PAYROLL” in the Company Entry Description. This is not an exhaustive list. Users should keep in mind the ACH fraud risk mitigation intent of the rule when determining whether their situation requires the use of “PAYROLL.”

When to use “PAYROLL?”

• When paying any income earned from employment to an employee’s consumer account (examples: wages, salaries, tips, bonuses, commissions, etc.).
• When making payroll allotments to an employee’s Health Savings Account, Individual Retirement Account, or other type of consumer account, as these payroll deductions are components of salary.

When NOT to use “PAYROLL?”

• When paying pension and other retirement payments.
• When making employee reimbursements for travel, mileage, etc.
• When making employee reimbursements from Flexible Spending Accounts.
• When paying royalties, interest, dividends, or similar types of revenue payments.
• When paying tax refunds or refund anticipation loans from tax preparation companies.
• When paying workers’ compensation payments.
• When paying insurance payouts.
• When making payment for business-to-business vendor payments.

Yes. Originators initiating payroll and other compensation payments are required to include “PAYROLL” within the leftmost 7 characters of the Company Entry Description field. For the “PAYROLL” description only, the Originator may utilize the remaining 3 characters for additional descriptive purposes, at its discretion.

Examples:   PAYROLL

                     PAYROLL 02

                     PAYROLL424

                     PAYROLLEMP

No. An RDFI may choose to take advantage of intelligence enabled by the use of the PAYROLL descriptor, but the RDFI is not required to act on PPD entries because of this description.

Any Originator collecting payments from consumers via ACH debit for the online purchase of tangible goods is required to use the descriptive statement “PURCHASE” in the Company Entry Description field no later than March 20, 2026. An e-commerce purchase typically uses the WEB SEC Code, except as permitted by the rule on Standing Authorization to use the TEL SEC Code.

(Examples of the types of payments that fall within the “PURCHASE” category are included below.)

Originators must use the descriptive statement “PURCHASE” for ACH debits to consumer accounts for the online purchase of goods, also known as “e-commerce” purchases. This descriptor provides RDFIs with additional information about the nature of the underlying transaction – that is, the online purchase of tangible goods, which can sometimes present a different risk profile compared to the online payment for services. Clearer identification of the purpose of certain transactions can help to improve the effectiveness of targeted risk mitigation efforts and tools that may be utilized by RDFIs and other participants.

For purposes of this rule, an e-commerce purchase is a debit entry authorized online by a consumer Receiver (i.e., a WEB debit) for the purchase of tangible, hard goods, including recurring purchases of tangible goods first authorized online. (Note: To the extent permitted by the rule on standing authorizations, certain e-commerce payments may also use the TEL Standard Entry Class Code.)

E-commerce purchases do not include the purchase of services.

Below are a few examples of when to and when not to use “PURCHASE” in the Company Entry Description. This is not an exhaustive list. Users should keep in mind the definition of e-commerce purchase for purposes of this rule when determining whether their situation requires the use of “PURCHASE.”

When to use “PURCHASE?”

• When collecting payment from a consumer for the one-time, online purchase of a hard, tangible good, e.g., clothes or jewelry.
• When collecting a monthly, recurring payment from a consumer for the purchase of a tangible product where the membership or subscription sign-up occurred online, e.g., monthly vitamin subscription.
• When the online purchase of a tangible good results in multiple payments to the consumer’s account, e.g., Buy Now Pay Later.

When NOT to use “PURCHASE?”

• When collecting a one-time payment from a consumer for the online purchase of a service, e.g., a telehealth visit co-pay; mail or shipping fees.
• When collecting a monthly recurring payment from a consumer for a service where the authorization occurred online, e.g. payments for telephone or internet service, utility payments, rent or lease payments, installment loan payments.
• When collecting payment from a consumer for the online purchase of a license, such as a hunting, fishing or business license.
• When collecting monthly payments authorized by a consumer online for the payment of insurance, such as car or life insurance.
• When collecting monthly payments from a consumer for a gym membership.
• When collecting payment for a business-to-business transaction.