Payroll Payments in the Fast Lane

This article was first published on LinkedIn. Subscribe to Ahmed Dekmak's 'Building The Payments Web' newsletter to read his articles as soon as they are published.

Set the scene

Since 2019 we’ve offered an international and domestic bulk payments facility. What is bulk payments I hear you ask? Bulk payments build upon our core functionality of offering Accounts Payable (AP) payments via the Faster Payments and SEPA networks, but en masse and without the tedium of repeating the same steps for every payment. If there’s one thing we don’t want, it’s fatigue whilst entering payment details as this eventually leads to mistakes. Fortunately, we’ve always been in the business of ensuring the intended amount of funds goes from source to intended destination, and in over 20 years we have yet to miss a beat.

Powered by the CXTN platform, we’re able to scale to meet the demands of our clients. Regardless of there being 1, 1,000 or 10,000 payments in a single file, our orchestration layer is nimble enough to process all payments in a timely manner whilst ensuring they arrive at their destination on the intended payment date. Over time, this product offering has grown significantly, especially in the payroll sector.

Our platform currently offers the ability to use our in-house template, a Xero output file, or build/propose a bespoke file based on your own requirements. Once defined, you populate the file, and then upload it back into the platform. The system will then verify the contents, validate the individual line items (formatting & bank details etc.) and then commence with the payment run. Due to client demand, we decided we wanted to take this to the next level and develop the current payroll offer both for in-house payroll but also with bureau specific functionality rather than have it piggybacking an existing offering.

Payroll in CXTN

We’ve since identified that the majority of our bulk payment clients were actually using the platform for processing payroll payments both internal payroll; referred to as “in-house” in the payroll space and some umbrella businesses catering to contractors pay. However, that left a large portion of the market off the table, namely the outsourced providers who process payroll on behalf of a business; chances are if you work for an SME, your wages are paid through an outsourced provider! So, we set about developing a payroll payment facility catering specifically to them.

What’s so special or different about these outsourced providers? Have you ever worked at a company and wondered why a payrun closes a few weeks ahead of payday? No? neither have I. But that’s due to the payment network typically used by these outsource providers; aka BACS, which stands for Bankers' Automated Clearing System, and is significantly slower than the Faster Payments alternative that we’ve become accustomed to over the years.

BACS files, referred to as Standard 18, forms part of ISO 20022. They’re a proven concept and something that’s not going away anytime soon; especially with all these outsourced providers still heavily relying on it. As a result, we’d like to announce the incorporation of a BACS upload facility into our new Payroll product. This will allow new and existing clients the ability to upload a BACS file and send it over the Faster Payments network.

“BACS over Faster Payments”

This caters for last-minute payroll changes, no more having to close the payroll run weeks in advance, and as a company, the funds are sent out on the day of, which is better for cashflow management. The beauty of an ISO standard approach? No need to key in data to a spreadsheet or UI. The information is produced by the payroll software as-is, in the form of a BACS file, and can then be uploaded fuss-free.

24.7.365 processing for our payroll enabled clients. So long as the Faster Payments network is up, you can be assured that your file will get processed and your payments will be sent by the platform.

We’re agnostic and want to support client and prospect requirements, so integrating is key. Partnerships with innovative cloud payroll solutions provide the ability to link your account within our platform and automate the payrun payment process by coupling your Caxton account with your payroll provider.

What about Non-Payroll Providers?

Not to take the shine off our future outsourced provider clients, I’d like to take the moment to inform our in-house payroll clients that we are exploring the possibility of supporting alternative output files. If you’re interested, please reach out to us for a conversation as integrations are definitely on our agenda for the coming year.

and one more thing… two actually

Embedded payments are central to what we do, and payroll is no different, as we’ve exposed this functionality through our API. Our API supports payroll “over the wire” and the added benefit of integrating through our API is that you have the ability to build your own authorization/approval flows. This full suite of APIs is available for potential partners to tap into from May 2023. The ideas are endless. For example, an outsource provider could integrate our API into their in-house system and use it to automate the payroll of all their clients. So, rather than passing files around from machine to machine or department to department, they can daisy chain the two systems so that the output of the payroll software can be automatically fed through to the Caxton platform via our API.

and finally, on the back of our recent partnership with Open Banking provider TrueLayer, we’re looking to introduce Open Banking to our payment facilities. This will give clients the ability to fund their payroll payments on-demand, following successful validation of the payment file. Watch this space….