Payroll and BACS

BACS stands for Bankers Automated Clearing Services and is a popular and secure way of transferring money from one bank account to another. There are other methods, but it is the most popular method in the UK, with more than 90% of the UK workforce being paid via BACS. In this article we look at how BACS is used for payroll purposes and comment on how secure the system is.

How is BACS Used for Payroll?

For paying wages through the payroll (as well as paying suppliers), the Direct Credit system is used. All this needs is the name of each payee’s bank, the account number and sort code, and, of course, the amount to be paid.

To access the direct credit system and send a payroll payment you will need to use approved software. The easiest way to do this, especially for small businesses who often don’t have a separate HR/Payroll department is to use an outsourced payroll provider, such as JL Payroll Services, as we already have the required licence to access the direct credit system.

Once your payment details are sent to us, the BACS system distributes the data for each employee to their bank so that their wages/salary can be debited from your account and credited to theirs.

How Long Does a BACS Payment Take?

The answer is 3 days, as follows:

  • Day one. We submit our payroll file for your company file to BACS. This details the payments to be made.
  • Day two. BACS officially takes receipt of that file. It processes the file ready for distribution to the paying banks.
  • Day three. This is when the payments are made.

Regardless of whether you process in-house or whether you use an outsourced payroll agency, this time frame is always the same.

How Secure is BACS?

BACS uses SSL encryption and is password protected. It is also constantly monitored and is only accessible via software pre-approved by BACS. This means that the system is extremely secure to use.

The Benefits of Using BACS

Perhaps the biggest benefit is the reduction in administration and reconciliation time required. However, even greater savings can be made if you outsource your payroll. If you outsource your payroll, then not only will you benefit from BACS, you also benefit from us preparing all the payroll data that BACS need to ensure your staff get paid.

Talk to us about outsourcing your payroll.

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