What’s the difference between BACS and Faster Payments in the UK?

There are a few different ways to pay employees in the UK, the most popular method of payment being direct deposits to employee’s bank accounts (for employees on PAYE). However, what other banking options and systems are available to transfer money from your company’s account to your employee’s account? 

This article will explain what BACS and Faster Payments are, in order to make it easier for you to understand and decide which of these options would work best for you and your business.

What are BACS Payments?

BACS payments, also known as Bankers Automated Clearing Services, is a type of bank transfer between bank accounts. It can either be a direct debit or direct credit, meaning it can be used to pay employees, and financial teams can also pull funds out of a customer’s bank account, to collect payments from customers.

Although BACS payments are not same-day payments, they are still the number one bank payment method UK businesses tend to use.

The processing time, or window, is 3 days, though it’s important to note that payments can only be made on standard working days, that is, from Monday to Friday, even though it’s an electronic system.

The main benefit of using BACS payments is that they generally have a lower cost per transaction than other payment methods. Charges then depend on the volume processed, as well as the bank used.

Another benefit of using BACS payment is that most payroll and accounting software supports BACS files.

What are Faster Payments?

As the name suggests, Faster Payments are payments that clear on the same day or almost instantly, rather than 3 days like BACS payments do. With this payment option, the funds show on the recipient’s bank account in a matter of seconds.

Faster Payments don’t have a specific processing window or cut-off time, and they clear even on weekends and bank holidays. This is especially helpful for UK businesses that run weekly pay.

Faster Payments is one of the most expensive options to make bank payments, normally at £2.50 per transaction, unless you have a payment system such as Telleroo, with which the cost goes down to £0.45 or less.

Choosing Faster Payments puts you in control of your payroll times, eliminating any strict payment deadlines, and allowing you to create your own payment process.

How do you choose between Faster Payments and BACS payments in the UK?

After going into the main differences between the two payment options, you might have an idea of which method works best for you.

However, to make things just a little bit easier, ask yourself these questions before deciding on BACS or Faster Payments:

• What is your payroll frequency?

• Have you got strict payment deadlines?

• Would you benefit from having an additional payment system?

• What payment times can your payroll system provider support?

When should I use BACS vs Faster Payments?

Understanding when to use each payment system becomes clearer with practical examples:

As these examples show, the 'best' payment method isn't fixed, and depends entirely on timing and urgency. A business paying 50 employees monthly via BACS saves over £1,300 annually compared to using Faster Payments for the same task. But when Friday evening arrives and you realise you forgot to process a leaver's final pay, those savings mean nothing, you need Faster Payments.

💡 The smart approach? Use BACS for everything you can plan ahead: regular monthly payroll, scheduled supplier payments, routine transfers. Reserve Faster Payments for genuine urgencies: same-day corrections, weekend payments, or situations where the 3-day BACS window simply won't work.

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