Recent media reports have suggested that many users of BACS services have yet to start the migration process to BACSTEL-IP, the replacement for the traditional BACS submission system.

Among the various headlines were the following:

• Thousands of major employers are facing a wages crisis unless they act immediately to upgrade payroll systems
  
  
• New Year payroll crisis warning to UK employers

The organisation that represents the major banks and building societies in the UK for the provision of direct credit and direct debit services is BACS Payment Schemes Ltd (BPSL). Users of the old BACSTEL system and the replacement BACSTEL-IP system do not deal with BPSL direct, but with their bank and with the supplier of their transmission software.

The press comments on the subject used information that was contained in a press release issued by BPSL on 11 May this year. At that time, over 45% of businesses had migrated. The warning, however, was that "the small business sector is facing a trip back to the financial Dark Ages of paying suppliers and employees by cheque and cash, according to new research from BACS Payment Schemes Limited."

That research indicated that 87% of small businesses were aware of BACSTEL-IP but that 39% were unaware that December 2005 is the date by which the process needs to be completed.

Approximately 100,000 businesses have to migrate, of which some 35,000 are "direct submitters" and 65,000 are "indirect submitters". The current situation, in August 2005, is that about 65% of submitters have migrated, leaving around 35,000 still to make the move. There is now about 95% awareness of the migration requirement.

Businesses are "direct submitters" if they originate their payment instructions, create payment files and submit them direct to BACS. The existing BACSTEL service will be switched off at the end of December 2005, so direct submitters must complete their migration by then.

About 15,000 direct submitters have not yet migrated, including some BACS bureaux, local authorities, universities and schools, charities, and larger businesses. As it can take several months to select the appropriate software from one of the approved suppliers and then work through the various stages of migration, there is a real concern that many businesses will not be ready in time. However, the migration process for small businesses, with perhaps just a single PC, is a relatively simple procedure, with lots of help from the chosen software supplier.

Businesses are "indirect submitters" if they use a direct submitter to send transactions on their behalf. Although migration is a much simpler matter, there are still 20,000 businesses that have not yet completed the process. A major concern for BPSL is that many direct submitters think that they are not affected by the introduction of BACSTEL-IP - it affects the bank or bureau that sends their transactions but there is nothing they have to do. That is incorrect.

Every indirect submitter must re-register to use the new system. They must provide their contact details, including an email address, and they must provide the name of the direct submitter that is authorised to submit their transactions.

In the context of payroll, payroll bureaux and many firms of accountants are direct submitters. Their payroll clients are "indirect submitters" and they must all go through a simple and quick migration process that involves only the completion of an application form from their bank. One advantage of migrating is that it gives them access to the reports that are available to them on the BACS payment services website. However, if they fail to migrate, their bureau or accountant will not be able to submit their transactions in January 2006 and they will have to pay their employees by other means.

It is the potential affect on the payment of wages and salaries that concerns BPSL the most. It is expected that the approved suppliers of BACSTEL-IP will struggle during the autumn to meet the demand for their services and there will still be some direct and indirect submitters who will not have migrated by December. At that time, the banks will be writing to all who have not migrated, spelling out to them the alternative options available to them for paying their employees.

The concerns are real, therefore, that some employees will find themselves being paid in cash or by cheque in January. For those who rely on cleared funds arriving in their accounts by a particular date, payment by cheque will cause great difficulties and raise the prospect of employers having to fund bank charges.

If, therefore, you are an indirect submitter and you pay your employees by BACS through your bank, or payroll bureau, or accountant, you have two actions to take:

1. speak immediately to the BACS bureau that handles your transactions and gain reassurance that they have either migrated already or will have complete the process in time, and
   
   
2. if you have not yet registered to use the new service as an indirect submitter, complete the application form immediately.

Full details of migration for both direct and indirect submitters are available at the links below.

...back to 11 August 2005

Source:
Small businesses risk return of the cheque
Direct submitters
Indirect submitters

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