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The ABCs of BACS

12th Feb 2015
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RTI BACS is coming out of the shadows of PAYE reporting. While it remains optional, HMRC have confirmed that paying employees by RTI BACS is best practice. For employers, as well as practice payroll and agents providing PAYE services to clients, here is a brief guide that answers the five key questions:

1.    What is it?
2.    How do employers access RTI BACS to pay employees?
3.    What does it cost?
4.    Are there any client monies issues?
5.    Why use it?

First, it’s worth clarifying what is meant by RTI BACS as “BACS” has become a generic way to refer to electronic payments without being specific about how the payment is instructed. So general references to “paying by BACS” more often than not refer to internet banking, where the payment (to an employee etc.) is instructed via the bank’s standard internet payments interface.

What is it?
RTI BACS, or Direct BACS, uses the same core payment network as internet banking - the key difference is how the payment is instructed. To make payments via RTI BACS a business/employer uses a BACS Service User Number, or SUN. Just like setting up internet banking a SUN is part of a business’s electronic banking standing instructions. There are no exceptions: if there’s no SUN then it’s not RTI BACS. And RTI BACS is the only payment channel that’s integrated with PAYE and Universal Credit.


How do employers access RTI BACS to pay employees?
There are two ways to access the Direct BACS payment channel: either directly or indirectly. The route into BACS a business chooses is down to simple economics. Large businesses with high transaction volumes which justify investing significant sums in their own direct access infrastructure and security arrangements may choose to submit directly to BACS.

However, the indirect access route is very low cost, and cost effective even for the very smallest businesses with only 2 or 3 employees, as explained below. The indirect access route relies on a payments partner like CreDec to provide the expensive security and submission technology, so all the business needs is a SUN to submit payroll payments instructions to BACS.

What does it cost?
Our entry level costs for RTI BACS start at £7.50 per month and typically go down from there.
If you thought BACS was expensive, now you know better.


Are there any client monies issues?
No – none – so the headache of client monies regulations doesn’t apply. Funds never touch the payroll agent or CreDec: as with all Direct BACS transactions, payment is transmitted directly from the payor’s bank account to the payee’s bank account; from employer to employee.


Why use it?
The protections, security and convenience of using BACS to originate your payroll and other payments (Auto Enrolment into workplace pensions etc.) in this way are considerable.

•    RTI BACS hashing offers major safeguards for employers making them compliant with HMRC ‘best practice’ for PAYE
•    £7.50 pm or an HMRC £100pm automatic penalty for late filing?
•    Employee UC benefits and tax credits are not at risk where issues arise with an employer’s PAYE scheme
•    Payments can be authorised and scheduled automatically in advance
•    Security arrangements allow collaborative working solutions for businesses and payroll providers
•    BACS unlike Internet Banking does not make instant “cash” payments: in an emergency, payments can be recalled
•    It provides a total audit trail of payments

We’re passionate about supporting UK small and medium businesses: CreDec gives SMEs big company capabilities without the big costs.

To find out more about CreDec RTI BACS payment solutions for your business or if you want to offer PAYE best practice payment services to your payroll clients, get in touch at or call us on 0871 350 0490


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