Jointly created by Income group, Moorepay and the Chartered Institute of Payroll Professionals Faster Payments Report 2022
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FASTER PAYMENTS SURVEY REPORT 2022
Contents
Foreword
3 3 3 3 4 4 5 5 5 5 5
Problem/ purpose
Key findings
Conclusion of results
Processing payments
What type of payments are made by the payroll team?
Payment errors
Payments made outside of payroll
How many payments are made outside of the regular pay run each month?
Recovering overpayments
What proportion of overpayments to leavers are eventually recovered?
BACS deadlines
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Correcting payment errors
6 6
How do you make payments to employees outside of usual pay days?
How are errors corrected? Who pays for these errors?
7 7
Would employees be better motivated to working additional shifts/overtime if they were paid more quickly?
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Faster payments in payroll
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Conclusion
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FASTER PAYMENTS SURVEY REPORT 2022
Foreword
Problem/ purpose In September 2021 we looked to payroll and HR professionals to gain a better understanding of Faster Payment usage, how payment errors are corrected, and the cost attached to amending payment errors. Key findings To no surprise, there’s growing knowledge of Faster Payments in the industry. While most payroll departments use real-time payments in some areas of their payroll process, typically they don’t use these payments for their bulk payroll payments. That means the majority of the market is missing out on the key benefits of Faster Payments including: greater flexibility, cost reduction and time savings.
Our survey revealed almost a quarter of respondents identified between 1% and 10% of payments had errors.
However, the way in which they’re correcting these errors is still via one of the slowest payment methods, with 41% of respondents using BACs.
A whopping 73% of respondents confirmed employees had been overpaid as a result of late data. This reinforces the importance of greater time and flexibility in the payroll processing window.
Interestingly only 31% recover 91-100% of overpayments to employees. Meaning the majority of employees are not claiming overpayments which will be hurting the bottom line. This could be down to the slow and costly impact of BACS. The results of the survey further support this - 46% believe payroll accuracy could be improved if payroll teams had an extended payroll deadline. Conclusion of results It’s clear there is a long way to go until the whole market is using Faster Payments to process the bulk of their payroll payments. However, with 67% of respondents willing to consider changing to Faster Payments it’s a matter of ‘when’ and not ‘if’.
Until then the vast majority of the market will continue to battle time pressured end of month processing, costly and uncapped BACS/CHAPS fees and delayed employee payments.
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FASTER PAYMENTS SURVEY REPORT 2022
Results
Processing payments
Payroll departments across the UK deal with billions of pounds every month, we found a staggering 85% of these payments are done via a single payment method - BACS.
Our survey revealed that 3 out of 5 professionals use Faster Payments in some capacity, however it is evident this is limited in scope. Of those that don’t use Faster Payments, 57% attribute it to the lack of visibility in the market. We know that payroll is responsible for a wide range of payments. Beyond ensuring employees are paid accurately and on time, they pay third parties, handle expenses, process pay as you earn (PAYE) to HMRC and manage employee loans and advances.
What type of payments are made by the payroll team?
Headlines: ● 85% of payroll payments are done via a single payment method - BACS.
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FASTER PAYMENTS SURVEY REPORT 2022
Payment errors
No matter the size of business, and the amount of care that’s taken, payment errors are inevitable. Our survey revealed 3 out of 4 respondents had a payment error rate of less than 1%. That’s good news: incurred costs are kept low, and accuracy rates remain high. Payrollers expect a 99%+ accuracy rate so even when error rates are low, the time spent on correcting them can be substantial. Payments made outside of payroll However, even with a low percentage of errors, payroll teams process in volume and are still required to make additional payments outside of the regular pay run. Almost half of respondents deal with 6 or more payments outside of the standard pay run, with 1 in 5 dealing with 20 or more.
Howmany payments are made outside of the regular pay run each month?
The remaining 23% of respondents identified during each pay cycle, between 1% and 10% of payments had errors, increasing the costs of payroll by using payments such as CHAPS to correct these issues. Recovering overpayments We found the late notification of leavers is a common issue in payroll teams and can generate complex errors and significant overpayments. Yet only 31% of survey respondents recover 91-100% of these overpayments. While 31% recover 0-10% of all overpayments made to leavers.
What proportion of overpayments to leavers are eventually recovered?
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FASTER PAYMENTS SURVEY REPORT 2022
Headlines: ● Almost a quarter of respondents identified between 1% and 10% of payments had errors. ● Only 31% of survey respondents recover 91-100% of these overpayments.
BACS deadlines
The payment deadline for BACS means payroll teams must finalise payroll at least two days prior to pay day. Often, payroll teams will sign off final payments even earlier than this deadline to provide additional contingency time within the payment cycle. Only 1 in 3 respondents submitted payment on BACS deadline day, with almost 30% submitting payments three or more days before the deadline day. This results in payments that can’t be altered for a week or more prior to payday. This rigidity can prevent the flow of late data into payroll, such as late leaver information. This generates risks of overpayments, or a need to recall entire payments. This is evidenced by 73% of respondents who confirm employees had been overpaid as a result of late data. With 47% confirming that a chargeable BACS recall had been required to correct the errors in the pay run. Headlines: ● 73% of respondents confirm employees had been overpaid as a result of late data. ● 47% confirm chargeable BACS recall has been required to correct the errors in the pay run.
Correcting payment errors
How do you make payments to employees outside of usual pay days?
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FASTER PAYMENTS SURVEY REPORT 2022
How are errors corrected? The majority of professionals are using Faster Payments as part of their payment correction process. However, 41% of respondents use the slowest payment method, BACS, to correct payment errors and to make additional payments to employees. This results in employees having to wait a minimum of 3 days before they receive the pay due to them.
22% continue to use the most expensive payment method CHAPS, which removes the time barriers of BACS but at a significant cost.
Payments made outside of the standard payroll are particularly time consuming and are often administered on an individual basis making the manual element much more challenging than in a standard pay run. The time spent making these additional payments can’t be underestimated in any payroll environment. Who pays for these errors? In a bureau/outsourced payroll environment, 10% of providers take on these additional costs themselves, and 43% pass on the cost unless the bureau/provider was at fault. Maintaining a balance between tight margins, and client satisfaction is an ongoing challenge for those providing payroll as a service. The frequency of payment errors, and the cost of correcting them will inevitably place a strain in both of these areas.
Headlines: ● 41% of respondents use the slowest payment method, BACS, to correct payment errors.
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FASTER PAYMENTS SURVEY REPORT 2022
Those who identified that they used CHAPS to correct payment errors made, on average make 127 CHAPS payments across the year, at an average cost of £11.42 per payment. An additional £1450.34 cost as a direct result of payroll inaccuracy. The survey confirms that 46% believe payroll accuracy could be improved if payroll teams had an extended payroll deadline. Furthermore, 1 in 3 believe employees would be more willing to work additional shifts or overtime if they knew they would be paid more quickly. Would employees be better motivated to working additional shifts/overtime if they were paid more quickly?
Faster payments in payroll
Whilst most payments are processed via BACS, 67% would be willing to consider changing to faster payments for expenses, PAYE payments, court order and other third-party payments. The benefits of faster payments were clearly identified by at least half of participants, with the top 5 recognised as: ● 58% - Removal of additional costs e.g. CHAPS ● 57% - Ability to make payroll payments any time of day including weekends ● 56% - Speak of responsiveness to employees/clients ● 52% - Extended payroll deadlines ● 42% - Visibility of transaction status/confirmation that employee has been paid However, respondents were uncertain about the cost of faster payments . When asked how much they thought faster payments cost, responses ranged from £0 to £30. On average the anticipated cost was £2.67 per transaction, this number far exceeds the cost payrollers should expect to pay for this type of payment.
Headlines: ● 67% would be willing to consider changing to faster payments
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FASTER PAYMENTS SURVEY REPORT 2022
Conclusion
While there is a wide adoption of Faster Payments in the market, our survey highlights the lack of real-time payment usage across bulk payroll payments. Results reflect there are continued errors across payroll payments, ones that comes at a cost. With a huge volume of payrollers still using BACS and CHAPS payments to recall mis-payments, or some not recalling these payments at all, it’s obvious businesses are missing out due to costly mistakes. Flexibility and responsiveness are two key tools that could help payroll teams reduce the costs and admin that come with payroll processing. Payrollers should take a deeper look into payment processing, to gain a better understanding of how real-time payments could alleviate the end of month strain they feel.
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FASTER PAYMENTS SURVEY REPORT 2022
Jointly created by:
Published February 2022. Information correct at time of publication.
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