Countdown to payment switch

Here’s a sobering thought to start the New Year: from midnight 31 December, up to 20,000 companies may no longer be able to pay their staff in the usual way. This could be the stark reality facing your organisation if it has not yet made the migration to the new Bacstel-IP delivery channel for submitting Bacs payment instructions to the bank.

In 2002, Bacs (which rebranded itself as Voca in 2004 – see ‘Bacs facts’ below) launched its Bacstel-IP channel. It enables users to make file transmissions across the internet and offers a faster, more secure payment submission service. Bacs announced its intention to switch off its existing telecommunications channel – Bacstel – on New Year’s Eve 2005.

To make use of Bacstel-IP, organisations need to buy one or more smartcards from their bank and install new software from one of the 25 Bacs-approved suppliers. Alternatively, they can opt for a hardware security module (HSM), which automates some or all of the payment submission process.

Heads in the sand

While more than 90,000 of the 110,000 Bacs customers have already successfully migrated, there are still 20,000 that have not yet done so.

Mike Hutchinson, Bacstel-IP marketing manager at Bacs, is confident that his company knows the status and progress of some 10,000 of these outstanding organisations – but that still leaves 10,000 unaccounted for.

Some of these may be organisations that are still registered as users, but no longer require the service. However, Hutchinson fears that many of these organisations are simply sticking their heads in the sand, thinking the change will not affect them.

“These are the companies that need a wake-up call,” he says. “[They] can’t assume that their bank or a software supplier will make the migration for them. They must take responsibility for it themselves.”

Payroll’s position within your company – whether it’s closer to HR or finance – will determine how much involvement HR has in the transition. But now is the time to ensure the correct system is in place, and that working processes and procedures are being developed to take advantage of the improved service and its features.

“It starts with making sure your organisation, or the payroll bureau you’re using, has migrated, so you will be able to make the Bacs submission,” says Hutchinson. “And remember that directors are paid separately, so ensure both systems have been migrated.”

Companies may have already left it too late to find a supplier that can install the software in time for the deadline. They will need to find an alternative method of paying staff while the transition is being made. In some cases, there has been talk about companies having to resort to paying staff by cash and cheque, but these are worst-case scenarios, says Hutchinson. He believes the most likely interim path is to use a payment method offered by your bank or a payroll bureau.

Benefits of Bacstel-IP

Many HR and payroll departments will have already been working together to prepare for the switch, and some have used it as a catalyst for wider change. Bacstel-IP promotes the use of electronic documentation and enables payroll and HR to streamline functions such as data input.

The big advantage of Bacstel-IP is the increased level of security and confidentiality it offers, courtesy of the latest public key infrastructure (PKI) and smartcard technology (see ‘key terms’ below). It enables organisations to assign different levels of security and provides an audit trail that can be traced back to a single employee.

“It represents a great opportunity for HR and payroll to work together to assign new security responsibilities,” says Hutchinson.

On its busiest days, Bacs deals with up to 70 million transactions, and typically handles five billion a year. Bacs predicts this figure will grow to six billion over the next two years and, on peak days, it could handle 100 million transactions.

“The system simply wasn’t built to handle this volume,” says Hutchinson. “If we hadn’t done anything, one day, it would have fallen down.”

Bacs: key terms

  • BAB: a Bacs Payment Scheme or Bacs approved bureau.
  • Bacstel: the existing telecommunications channel that provides access to Bacs payment schemes, which will be switched off on 31 December 2005.
  • Bacstel-IP: the new channel that replaces it. It allows users to make their Bacs file transmission via the internet (or an extranet) and offers increased security through the latest public key infrastructure (PKI).
  • Bacs cycle: the three-day cycle it takes for payment instructions to be submitted for Bacs processing, and then to reach the destination account.
  • BASS: the Bacs-approved software service aimed at software companies which are developing products for Bacstel-IP.
  • Public key infrastructure: the technology that facilitates a secure exchange of information from computer to computer.

For more information: go to

BACS facts

  • Formerly known as the Inter-Bank Computer Bureau, Bankers Automated Clearing Services (Bacs) was established in 1971. Its role was to provide a central clearing function for automated bulk payments.
  • In 1985, it extended its membership to building societies, and became Bacs Limited.
  • Following a governance review in 2003, it separated into two companies: Bacs Payment Schemes Limited, responsible for governing the rules of the payment scheme, and Bacs Limited, which focuses on processing the payments and developing the technology used to facilitate this.
  • In 2004, Bacs Limited rebranded itself as Voca.
  • Today, the Bacs system is used to pay five million weekly wages and 25 million monthly salaries.

Who’s installing what?

  • Basildon District Council is going live with Intellect’s modular Workforce HR system after running it in parallel with its old proprietary system for three months. The integrated system runs across HR, training and recruitment, and offers self-service access. The council’s 17-strong HR team supports more than 20 locations across the district. A chief objective was to be able to share data for strategic reporting.
  • Cadbury’s Schweppes is speeding up graduate and management recruitment with online verbal and numerical reasoning testing. The online tests, provided by PSL, replace paper-based versions. About 4,000 candidates apply each year for the 20 available places on the company’s graduate programme. The three characteristics that it looks for among candidates are judgement, drive and influence.
  • InterContinental Hotels Group (IHG) is implementing HRM Connect Pay Review to manage its annual pay review process for more than 4,000 senior people across 20 global offices. Using Pay Review, IHG can hold all of its pay review data in a single online application, accessed through its company intranet.
    The software replaces the group’s existing spreadsheet-based system.


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