From maintaining employee engagement and satisfaction to effectively managing the costs of a business, a clear and reliable payroll process is crucial for business success. So, it’s important to choose a payroll system that suits your business needs.
In this guide, we explore the difference between BACS, CHAPS and Faster Payments, and how to choose a payroll solution that suits both your business and your employees.
What are Faster Payments?
When it comes to Faster Payments, the clue is in the name. They’re fast.
Faster payments are electronic payments that can be made online, over the phone or in person. The money arrives in the recipient’s bank account within a matter of minutes
How does Faster Payments work?
In the same way that you would pay a friend back for dinner or coffee, faster payments are made via a usual bank transfer.
In payroll, this means that payments (and changes to payments) can be made right up until the pay date cut off and funds will arrive in an employee’s bank accounts with minimal delays.
What is the difference between BACS and CHAPS payments?
BACS payments
Bankers’ Automated Clearing System (BACS) payments are the traditional bank-to-bank transfer and are still used across UK payroll teams.
Salary payments are categorised as direct credit payments, whereby a third party deposits money into your account.
BACS payments take three working days to clear in the recipient’s bank accounts and can only be submitted on working days (Monday – Friday) between the hours of 7am and 10:30pm.
CHAPS payments
Clearing House Automated Payment System or “CHAPS” payments typically refer to high-value money transfers, for example, house deposits or businesses paying suppliers or taxes.
These payments are usually set up by going into a branch, but some banks will allow you to do these online.
There is a strict cut off time for CHAPS payments and the system is open weekdays between 6am and 6pm for bank-to-bank payments.
There is typically a fee associated with processing these high-value payments, and this will vary from bank to bank.
What are the benefits of Faster Payments?
Faster payments significantly speed up the process of sending money and reduce payment time between bank-to-bank transfers.
The common theme between them all is that they are near-enough instantaneous bank transfers that ensure the money arrives in the recipients’ bank account on the same day.
There are different types of Faster Payment methods:
1. Single Immediate Payments (SIPs)
This is the most common type of faster payment and is usually a one-off payment that can be sent any time, any day. The money typically arrives in the recipients’ bank account instantly. There can sometimes be additional security checks around these payments if they are identified as being out of the ordinary, but these can be resolved through a series of brief security questions.
2. Forward-Dated Payments
These are one-off payments that are sent and received at a pre-arranged date and time. This can often include payments such as rent and bills and can be made 24 hours a day, seven days a week.
3. Standing Orders
Standing orders are repeated payments that are sent to the same recipient on the same recurring date. There’s no guarantee that these payments are processed within the same working day, but they are usually sent by 6am the following working day.
Faster Payments within payroll services
BACS has typically been the primary method for processing payments within payroll, but the three-day processing time and strict cut off dates can often lead to increased stress for payroll teams and leave little room for increased flexibility within salary payments.
Faster Payments will empower HR and payroll teams to run their payroll faster and more efficiently. The cash will remain in your bank account for longer, which is beneficial for overall cash flow.
This will also make life considerably easier for payroll teams who run a weekly payment, want to give staff more time to submit their timesheets and expenses. It’s also great for businesses who still want to pay new starters, even if they join close to the payroll cut off date.
“Faster Payroll Payments has had a big and positive impact… we have the flexibility to make changes right up to the last minute, which with our payroll mix is a huge benefit. And because we know exactly how much we’re paying for each payment, unlike with the mystery around bank charges, it is positive for our cash flow” – Ian Hensall, Director at Haydock Commercial Vehicles.
What is IGsend?
IGsend is an easy to use, flexible and affordable instant payments solution.
Trusted by hundreds of UK businesses, IGsend integrates seamlessly with your existing payroll model allowing you to use real-time payments to deliver your employees’ salary payments: accurately and on time, every time.
Watch the video below to see how IG Send allows businesses to make payroll payments 24/7, 365 days a year.
Book a free 30 or 60-minute demo and find out how IGsend could revolutionise your payroll system.
