Payroll management is one of the key aspects of running a business. Whether you have a small team of a few dozen people or a large one comprising thousands, you need a payroll system in place.
Without it, you can struggle with the timely disbursement of salaries, employee satisfaction, and regulatory compliance.
Nearly 90% of UK employers rely on BACS (Bankers’ Automated Clearing Services) payments to pay salaries to their employees. Also, about 80% of employees in the UK receive their salaries through this method.
If you still have doubts regarding setting up your payroll with BACS payments, we’ve compiled a comprehensive guide to help. Let’s jump right in.
Comparing BACS Payments To Other Methods
While it is highly popular, BACS is just one of many digital methods that banks use to transfer funds between different accounts.
To use this method for payroll, you can share the payment instructions with your bank and let it do the rest. It spells reliability, convenience, and cost-effectiveness for organizational payroll.
Conversely, speed is a critical factor when it comes to comparing BACS vs. Faster Payments. While BACS transfers can take three days, Faster Payments closes the transaction within a few seconds. Once you initiate the transfer, the payment is reflected in the recipient’s account right away.
Both methods have their upsides and downsides. However, BACS is far cheaper than Faster Payments, making it preferable for organisations making bulk payments.
When Is BACS Right for Your Payroll?
At this point, you will probably want to know whether BACS or Faster Payments is right for your business. BACS payments are ideal when you need to manage your payroll efficiently without spending a fortune.
They are trustworthy, with reports indicating that BACS processes some 500 million payments in the average month. Not surprisingly, a majority of UK businesses rely on this method.
Here are a few signs that indicate BACS payments are ideal for your payroll system:
- You follow regular payroll schedules, such as weekly or monthly
- You want a cost-effective payment method
- You are looking for a secure money transfer system
- You have a large workforce and want to reduce the risk of errors in bulk salaries
How Digital Payments Can Transform Payroll
Setting up your payroll with digital payments makes sense, regardless of the size and scale of the business, and regardless of whether you use BACS, Faster Payments, or any other method.
These solutions can transform your payroll process in the following ways:
- Efficiency through automation of payment transactions, reducing workloads for employees and saving time
- Accuracy with your workforce getting salaries on time without any chances of payment errors
- Regulatory compliance with payroll laws with a secure and standardised payment method
- Extensive cost savings with the elimination of the need for printing and distributing paper cheques
- Timely and accurate payments boosting employee trust and satisfaction, helping to cultivate a positive work culture
Setting Up BACS Payments For Payroll
Once you’ve done your due diligence and weighed your options, if you do want to move forward with using BACS payments for payroll, the process is simpler than you might imagine.
Here are the steps to set up BACS payments for payroll:
Check Legal and Regulatory Requirements
Like every country, the UK has some strict legal and regulatory requirements around payroll and electronic payments. From completing documentation to managing payroll taxes, you need to ensure compliance.
Likewise, you must follow the guidelines for accessing and storing people’s account information. Keeping these regulations in mind is essential to avoid penalties and legal hassles.
Choose The Right Payment Service Provider
The next step is to choose a bank or payment service provider to facilitate your payroll payments. Look for a financial institution with a solid reputation for BACS payment services. Remember to shop and compare because fees, services, and customer support make some providers better than others.
Get A BACS Service User Number (SUN)
Once you finalise your bank or payment service provider, you are ready to go ahead with the actual implementation part. At this stage, you need to get a Service User Number (SUN) by registering with BACS. You cannot make or receive payments without this number.
Ensure Payroll Software and BACS Integration
UK businesses had 29.7 million employees on payroll as of last year. With such volumes, automating the process with payroll software makes sense. Investing in a system that supports direct integrations with BACS is a good idea. You can also consider upgrading to one if your current payroll software isn’t compatible with BACS.
Implement Security Measures for Fraud Prevention
Since sensitive financial data is a part of BACS payments, you must have robust security measures in place to prevent data theft and fraud. Access control, data encryption, and regular security audits are some actionable ways to address the risks.
Manage Payroll Data for BACS Payments
You cannot take a set-and-forget approach to BACS payments, because you need to manage payroll data in the long run. Maintain accurate and up-to-date bank account details of your employees over the years and as your team grows.
BACS Payments Best Practices
Implementing BACS payments for your payroll is only half the work. You need to follow some best practices to maintain its integrity and reliability.
Here is a checklist to help:
Update Employee Data Regularly
Employee data may change as people join or leave your organisation. At times, employees change their banks or accounts. You should regularly update and verify bank details to prevent payment delays and errors.
Monitor Regulatory Changes
BACS payment regulations have been known to change. Likewise, payroll regulations may change from time to time. Stay vigilant about these changes and align your system with agility to remain compliant.
Maintain Records and Audit Trails
Maintaining thorough records of BACS transactions should be a priority. These include payment files, confirmations, and authorization forms. Records and audit trails can be your saviours in the event of disputes down the line.
Have a Backup Payment Method in Place
Potential issues with BACS processing, such as bank holidays and technical glitches, may crop up unexpectedly. You should have an alternative payment method ready to go, in order to avoid salary delays and compliance issues in such situations.
Conclusion
BACS payments can empower your payroll system with speed, security, efficiency, and cost-effectiveness. By streamlining payments, they can contribute to employee satisfaction and business success in the long haul.
All you need to do is find a dependable partner, implement the system seamlessly, and maintain it by following the best practices.
