More than a third of businesses around the country rely entirely on BACS, and have no backup systems in place. This leaves these businesses lacking payroll resilience, and ill-equipped to manage risks including cyber attacks.
Remaining entirely reliant on BACS systems to avoid the cost of upgrading systems is a false economy. This status quo has hidden costs that payroll leaders need to start accounting for.
So what can businesses do to build the payroll resilience that they, and employees, need?
Read more: The future of payroll
A key step will be to go beyond only running a cost-benefit analysis when considering whether or not to implement a backup payroll system. The same analysis needs to be run against the status quo, and the costs of payroll failures. This needs to include staff turnover costs, and the extra time paid to payroll teams working to run follow-up payment runs.
While we are seeing some confidence return in the economy, there’s still a lot of caution out there. Most payroll professionals recognise the risk inherent in relying solely on BACS to process payments, but any investment in tech or backup systems is subject to significant push back from budget holders. Thinking more broadly about the costs of the status quo can give these conversations greater depth.
Another key step will be to involve IT leaders in ensuring that new solutions are implemented effectively and are integrated with existing systems. This will give the new process the best chance of success, and also support a quick return on investment as payroll failures are avoided and less hours are wasted dealing with errors.
The costs of doing nothing
Most obviously, a lack of payroll resilience can leave employees unpaid and in financial distress. More than half of employees we surveyed reported having experienced being paid late by their employer. The country’s economic fortunes have improved over 2024, and the Bank of England base rate has come down, easing inflation. Nevertheless, many employees are still struggling with the cost of living; missed or late payments can cause serious detriment for them. For the business, it can fuel turnover, and reputational damage.
Alongside this, relying wholly on BACS and other legacy systems comes with a growing talent cost. Employees increasingly value flexibility, whether being paid at different points in the month, on a different schedule such as weekly or bimonthly, or in different geographies.
Read more: A third of payroll professionals have no backup for BACS
Furthermore, when judging potential employers, a key point of comparison for employees will be the flexibility they can offer, and the ways in which they can support employees through both expected and unexpected circumstances. Payments technology allows growing numbers of businesses to offer flexibility. Inflexible employers will look increasingly anachronistic as ever more digital natives enter the workforce.
As HR leaders well know, a business is only as good as its people. If those people’s payments are delayed, then the cost of investing in new systems or processes needs to be balanced against the hidden cost of the status quo. For productivity, employee morale, customer satisfaction and reputation, it’s increasingly clear that doing nothing to build payroll resilience is not an option.
Rupert Lee-Browne is CEO of Caxton, a payment provider business
