Chemical Bank officials said last week's delay on the payroll direct deposits for about 58,000 New York City employees was the result of a glitch in the bank's automated clearing house origination operations.

Early last week, New York's Office of Payroll Administration sent Chemical payment instructions via tape for the July 14 payroll disbursement.

Upon receipt of the tape, Chemical began the standard procedure of preparing the ACH payment file to credit the designated accounts in the various banks of city employees.

But a problem occurred when the file was placed into a temporary storage area on the system and not moved to the proper location for electronic transmittal, according to John Stefans, a spokesman for Chemical.

"A mistake occurred," said Mr. Stefans. "It didn't get transmitted."

When it was discovered that payments were not sent Friday, city and bank officials scrambled to fix the problem.

The payroll office offered its employees up to $200 in cash advances. About 35% of city employees receive their paychecks electronically.

Meanwhile Chemical reprocessed the file to make the funds available the next day.

The glitch - which reportedly delayed the direct deposit of New York's most prominent employee, Mayor Rudolph Giuliani - is a black eye for Chemical. But with the help of other area institutions, Chemical was able to limit the inconvenience to city workers.

It informed other New York banks of the problem and told affected employees that penalties incurred from returned checks would be reimbursed.

"Chemical and the 20 largest banks in New York are all cashing personal checks of affected employees," Mr. Stefans said.

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