What happens when a payroll debit fails for insufficient funds
Last updated: October 2, 2026
Before each payroll, Salsa, Alpaca's payroll processor, debits your organization's bank account for the full cost of that payroll: your staff's net pay plus the taxes and withholdings Alpaca files for you. If the account doesn't have enough money when the debit arrives, your bank returns it.
This article covers what happens next, what you need to do, and how a failed debit can affect your next payroll if it isn't resolved quickly.
The two rules behind everything
1. Payroll needs cleared money. A payroll is only funded once the money has been collected and has fully cleared. A debit that is still in progress doesn't count, and neither does a confirmation that the money is in your account.
2. A failed debit locks your account until a new debit clears. After a return, Salsa restricts your employer account. No new payroll can run on a restricted account until a new debit (a "re-debit") clears.
Who gets notified
Alpaca emails everyone in your organization with the Admin role and copies your organization's support address if you have one on file. If the person who manages your bank account isn't an Admin in Alpaca, forward these emails to them or ask us to add them as an Admin.
Step by step
1. The debit is returned. Your bank rejects the debit, usually with the reason "insufficient funds." Your Admins receive an email naming the payroll, the debit amount, and the debit date. The email begins with: NOTE: Please respond to this email when you have completed the next step.
2. Your staff are still paid for this payroll. Alpaca covers this payroll upfront, so your staff receive their direct deposits on the scheduled pay date. Your organization still owes the full amount, and Alpaca collects it through the re-debit.
3. Your account is restricted. Salsa restricts your employer account. This stops the same debit from bouncing repeatedly, which could cost you a fee from your bank each time. While the restriction is in place, no future payroll can run.
4. You add funds and reply. Move enough money into your payroll bank account to cover the full debit amount in the email. Then reply to the email with:
confirmation that the funds are in the account, or
if they aren't yet, the reason and the exact date they will be.
Please do this the same day if you can. The sooner you reply, the less risk to your next payroll.
5. Alpaca requests a re-debit. Once you confirm, our payroll team asks Salsa to debit your account again. We'll email your Admins when the re-debit is scheduled.
6. The re-debit clears and the restriction is lifted. Bank debits usually take a few business days to clear, and your account stays restricted until they do. Seeing the money leave your bank account doesn't mean it has cleared. When it clears, we'll email your Admins and Salsa will lift the restriction.
If it isn't resolved before your next payroll
If the re-debit hasn't cleared by the week of your next payroll, here's what happens. This timeline assumes a Friday pay date.
When | What happens |
|---|---|
Monday | If the re-debit hasn't cleared, we'll email you that your payroll is at risk. This is the latest we need to hear from you for direct deposit to remain possible. |
Wednesday | If the re-debit clears today, payroll can still go out by direct deposit. If it hasn't cleared, we'll contact you to set up a direct-pay fallback and send you the exact net pay amount for each staff member. |
Friday (pay date) | If you're on the fallback, pay each staff member their net pay directly, using Zelle or Venmo and the amounts we sent you. |
The bottom line: funds confirmed on Monday leave time for direct deposit. Funds confirmed on Thursday don't.
Questions?
Reply to the email you received, or contact support@alpacahealth.io.