It’s not if you’ll switch to Faster Payments, it’s when.
We’ve seen the volume of employees paid by Faster Payments rise rapidly through the first months of 2021.
Since November last year, we’ve almost doubled the number of monthly transactions. And in the same period, the monetary value of transactions has increased by almost 120%.
What’s more, the overall number of Faster Payment transactions in the UK increased by 22% in March 2021, compared with March 2020.
I’m keen to explain what Faster Payments are and the main benefits payroll teams see when using them. First-up though, some important context.
The history of payroll payments
Sixty years ago, employees received their earnings in an envelope. Back then, cash-payments were the most efficient way to pay people.
Of course, with the evolution of technology, payments leapt forward. In 1968, along came the electronic transfer of funds well-known as Bacs (Bankers Automated Clearing System). These payments took three days to clear but could be deposited directly into employee bank accounts. Pretty revolutionary stuff at the time!
CHAPs were introduced a little later in 1984 and enabled same-day transfer of funds, albeit with a price tag.
Fast forward to 2021 and Bacs is still the primary payroll payment method. But it’s time for another leap forward. And in fact, the shift towards the next method of making more efficient payments has already begun.
Faster Payments were introduced in 2008. And if you’re not using them already as part of your payroll processes, it’s not a case of if you’ll move over to this method, it’s when.
What are Faster Payments?
Faster Payments aren’t just ‘faster’, they happen in an instant. And if you have a banking app, you’re already using them. When you want to transfer money to a friend, you simply enter their bank details and the money hits their account right away. Your friend doesn’t need to wait three days for the money to clear like they would with a Bacs transfer.
If you can do this with your own personal banking app, you can do this with your company bank account too – and make payments to your employees in an instant.
What’s driving adoption of Faster Payments?
The COVID-19 pandemic has undoubtedly accelerated demand for real-time payment access for payroll teams. With so much new – not to mention, complicated – legislation introduced over the last 12 months, payroll teams have needed more time to calculate payroll. The three-day batch cycle of Bacs just hasn’t been meeting their requirements. What’s more, Bacs is costly to change, as well as slow to fix and re-submit payments.
What are the main benefits of Faster Payroll Payments?
With Faster Payments, payroll teams can delay their payroll data submission by up to two days. That’s two extra days to process payroll. Which allows more time to calculate, more time to check, and more time to get it right.
Plus, you can easily make last minute changes to payroll at no extra cost. Usually, late submissions and amendments have a fee attached, but not with Faster Payments.
Same-day payroll fixes also limit the negative impact of inaccurate employee payments. Which is crucial for businesses that have employee experience high on the agenda.
Also, when your pay day falls on a Saturday or Sunday, there’s no need to move it forward, reducing the payroll processing time even further. With Faster Payments you can stick to your pay date, even on a weekend.
What about the cost of Faster Payments?
Depending on your banking arrangements, it may seem that Faster Payments have a higher price tag than Bacs. However, there are other factors to consider in order to make a fair comparison of the costs and benefits:
- With Bacs there are hidden costs. For instance, if you don’t have appropriate funds in your account at the point a payment is taken, this can incur charges. With Faster Payments, you have longer to make sure there’s cash in the bank.
- When you need to make quick, last-minute payments, using CHAPs costs a whopping £25 per payment. Meanwhile, a last-minute payment with Faster Payments doesn’t cost anything extra.
- Bacs appear cheap on the surface, but ultimately, time is a payroll department’s most treasured resource, meaning Faster Payments offer more value for money.
In short, my thoughts are, don’t compare price tag with price tag. Think about return on investment and ask yourself how much is more time worth to your business?
Who’s using it?
Well, we’ve seen organisations with anything from a handful to 2500+ employees moving to Faster Payments. And industries range from healthcare, to logistics, hospitality, manufacturing, and financial services. In short, we’ve seen uptake from a range of company sizes across many different industries.
What’s more, we’re finding that once customers have made the switch to Faster Payments for their payroll payments, they’re also considering what other payments they could use it for (e.g. third-party payments.)
What does the future hold?
In the same way we shifted to Bacs payroll payments, we’re now seeing this same shift to Faster Payments. In fact, we’re already moving from the early adopter stage into mainstream usage of the service in the UK.
Comparing March 2020 to March 2021, the monetary value (£) of UK payments processed through Faster Payments increased by 14%. Meanwhile, the value of payments processed through Bacs dropped by 1% – this may not sound much, but equates to a drop of more than £50 million in payments.
For Moorepay customers, the future holds the launch of our Next Generation Payroll & HR Software. And that will see Faster Payments as an integrated part of the software, accessible via single sign-on by autumn.
Not a Moorepay customer? Get more information about Moorepay’s Faster Payroll Payments offering. Alternatively, if you’re already a Moorepay customer, pick up the phone to your account manager and they will be happy to answer your questions.