How Faster Payments solves the problem of payroll of variable pay

When it comes to payroll there is a circle to be squared; how do you ensure your process is as efficient as possible whilst also building in flexibility for your people?

For many businesses in the UK, payroll isn't a predictable monthly ritual; it's a high-stakes jigsaw puzzle that changes every few days. Whether you are managing hospitality shifts, temporary healthcare staffing, or seasonal construction surges, highly variable payroll presents a unique set of technical and emotional challenges. 

From the CFO’s point of view, having a set structure, with long cut-off dates means that work can be efficiently managed and errors are kept to a minimum. From the employees' point of view, if they work overtime on Thursday they’d like to be paid on Friday.

So how on earth can you make sure your payment processes are quick and responsive but still efficient?  Traditional banking frameworks, specifically the decades-old BACS system, were never designed for this level of fluidity. At Caxton, we’ve re-engineered payroll digital infrastructure to move businesses from "Friday payroll panic" to absolute operational confidence.

In this post, we're looking at some practical steps you can take to ensure that employees with variable pay get paid quickly and how Caxton helps solve the variable payroll puzzle.

The reality of variable pay: beyond the three-day cycle

If your workforce relies on commissions, overtime, or ad-hoc shift patterns, the traditional BACS three-day settlement window is your greatest bottleneck.

• Rigidity vs. Reality: BACS requires files to be submitted 72 hours in advance. In a variable environment, data is often still being verified right up until payday.

• The Cost of Errors: If an error is discovered in a BACS file after the cut-off, your only choice is a three-day re-run, meaning your staff—who may rely on that income—don't get paid on time.

• Last-Minute Starters: Variable workforces often have high turnover or rapid growth. BACS makes it nearly impossible to include a last-minute new starter who joined just before the main run.
  

Why you need a better variable payroll process

It goes without saying that pay is important.

Getting payroll wrong is one of the biggest demotivators for employees and in the midst of a cost of living crisis, underpaying someone could cause them significant difficulty.

If you employ casual or temporary staff then being able to pay them rapidly is a great way to ensure that they will be keen to work with you again in the future.

And when people do overtime it is fair for them to expect to be compensated at their next pay date.

Of course, if you are paying people who aren’t permanent employees then you need to pay in arrears but last-minute overtime changes and unpredictable hours can mean that payroll processing is fraught with difficulty.

But it isn’t all about salaries and wages. If an employee pays their own money for business expenses then they are out of pocket until they are reimbursed.

So a speedy, efficient payroll and reimbursement process can make a big difference to the way that your people feel about your business.

Understanding the process for variable payroll

For such an important business task it is always surprising how many finance heads don’t understand their own process.

Unfortunately, payroll isn’t sexy and there’s little credit in the boardroom when you tell people you have speeded it up or made it more efficient.

And yet there’s good evidence that payroll is one of the most inefficient processes in business and that when you get it wrong, it is the thing that upsets people the most.

So the first step is to really understand what you do now so that you can spot things that might be going wrong.

This is what highly paid consultants call the ‘as is’ map and it shows you all the steps that have to work perfectly for your payroll to be accurate and on time.

Map it out on a large piece of paper or your favourite spreadsheet. A really good choice here is to write each task on sticky notes and get your team to organise them in order on a whiteboard.

This is the point where things start to stick out. People start asking ‘why are we doing it that way’ and you start to see inefficiencies and tasks that are no longer needed.

Don’t feel bad though, this is quite normal, especially when you have a job that hasn’t been looked at for a while.

Remember that the number of tasks you have to do directly affects your cut-off dates and the effort you have to put in so this is a really valuable exercise.

Removing blockages

Now you have your process map you can start to look at the tasks that people do to run your payroll.

Some might stick out like a sore thumb. Often they will be jobs that were done for good reason back in the day but that make little or no sense now.

Next, have a look at dependencies. This is where the process can’t continue until a task is completed.

For example, you can’t run payroll until you have authorised timesheets.

Speeding up one task will reduce the time the whole process takes but analysing which things take the most time and effort or that stop the whole process continuing will help with the next step.

Embracing automation

AI is the latest buzzword in finance but you don’t need some fancy robot to make your payroll work better.

Most packages have a level of automation that can save time and effort and can leave your people to work on more important things.

You can set rules that carry out tasks based on the criteria you set. A good example here is linking your payroll system to your general ledger and automating your payroll journal.

Think about the systems you use now and investigate what is already available but that you haven’t yet implemented. Third-party apps are a great way to extend the functionality of your systems too as we’ll see in the next section.

Self-serve for speed

One of the biggest disruptions to the payroll process is leaving your job to answer questions. Now we aren’t advocating that the finance or payroll team should refuse to engage with your people but you can slim down the volume of questions you get by using self-serve wherever possible.

All good HR and payroll systems have a self-serve option and this is where employees get their own log-in to view their own details.

Typically they can download previous payslips, view the make-up of the current pay, change their bank details and find out how much holiday they have left.

Third-party apps can automate and integrate the production and authorisation of timesheets and expenses, two of the biggest blockers to payroll.

And with online accounting systems, it is a simple matter to integrate these so that data entry is minimised.

Forget BACS

Back in the day, BACS was a brilliant initiative. It made the payment process more secure and it meant that people got their money directly into their bank accounts.

But in truth, the process isn’t without its problems.

It can be a difficult method to use and typically we find that companies have to produce their payment file up to five days or more in advance of the actual pay date.

Unless you have an expensive system then it won’t integrate directly with your payroll and you can find people downloading and uploading CSV files with all the problems that this can bring.

And if you get one line wrong then you could find your entire batch rejected meaning that nobody gets paid!

If you want to reduce your time to payment and make the process safer and more efficient then you need to automate and integrate a Faster Payments payroll solution.

How Caxton solves the variable payroll puzzle with Faster Payments

We provide a Faster Payments-powered payroll infrastructure that allows businesses and bureaus to send near-instant salaries $24/7$. By moving from a legacy framework to a real-time rail, we offer total flexibility for weekly, variable, or last-minute payroll without the stress of a three-day lag.

1. Instant Execution and Corrections

Because our "Faster Payments rail" processes individual transactions in seconds, not days, you can run payroll whenever you are ready—even on bank holidays or weekends. If an error occurs, you can perform an immediate re-processing instead of waiting for a new bank window.

2. Segregated Sub-Accounts for Clearer Management

For bureaus managing highly variable pay for multiple clients, we provide dedicated client wallets. These segregated sub-accounts ensure funds are legally distinct, making reconciliation for fluctuating amounts automated and transparent rather than a manual nightmare.

3. Human Support in a Digital World

While we offer advanced payroll API integrations—such as our work with BrightHR—we don’t believe in "black box" automation. Our team proactively checks in ahead of key runs because we know that in high-pressure environments, human expertise is just as vital as fast technology.

"Even in high-pressure situations—late nights, early mornings and the occasional challenge of our own making—the Caxton team shows up, takes ownership and works alongside us to get the right outcome."

— Eira Hammond, Head of Payroll at Stint

The future of payroll is real-time

Payroll is often the Cinderella of the finance world. There’s no credit for getting it right 51 weeks a year and then wrong on one occasion so there is a temptation to say “if it ain’t broke don’t fix it”.

A variable workforce requires a resilient, agile payment partner. By switching to a Faster Payments-first methodology, you eliminate "outage anxiety" and ensure your team is paid for every hour they work, exactly when they expect it.

We’d love to help you move away from outdated banking cycles and toward a more flexible future. Book a demo with Chris, our Head of Payroll, to discuss your specific infrastructure needs and how we can support your growth.