35,000 companies risk missing payment switchover deadline

Around 35,000 companies are at risk of missing the deadline for moving over to a new system for paying salaries and direct debits.

The Bacs system that companies use to process such payments is being upgraded, with the existing system to be switched off at the end of the year.

But tens of thousands of companies have yet to start their migration, and if they don't act soon they could be forced to use cash and cheques to pay their staff next year.

Voca (formerly Bacs), which runs the system, wants to move its customers over to a new communications infrastructure because of massive growth in transactions.

At the moment it deals with 4.5 billion transactions per year, a figure expected to leap to six billion within a couple of years.

Mike Hutchinson, Bacstel-IP marketing manager, explained: "In replacing all the infrastructure, the first thing delivered was the interface for our customers into the business. It's the way our customers access Bacs in the new world."

Hutchinson said customers will also benefit from the upgrade: "It's a much better service - it's much more function rich."

Back in 2002, a deadline of the end of this year was set for moving over to Bacstel-IP. And out of the 110,000 companies using the system, 75,000 have already moved over. Read about The Bank of New York migration here.

According to Hutchinson, there are about 35,000 migrations still pending. Those fall into two categories: 25,000 that come though payroll bureaux, and 10,000 that are direct customers of Bacs which still have to act. "The companies that are left are very much leaving it to the last minute," he warns. "A reasonable average migration can take three months so we are really down to the wire."

The reason such a large number of companies have yet to migrate, Hutchinson said, is a combination of apathy and companies' belief that their bank or their software supplier will do it all for them. But he warned: "It can't work like that - companies have to take ownership. They really have to act on it now."

The costs of running both the old Bacs system and Bacstel-IP are very high, which means that it is too expensive to run both systems past the end of the year deadline. "We need them all to move from the old system to the new one so we can turn the old one off," he said.

Most big companies have either completed the project or are most of the way through, and many of those still to act are smaller businesses. But if they don't get the migration completed by the end of the year, they will either have to engage the services of a payroll bureau or use cash and cheques to pay staff.

But Jon Collins, principal analyst with analyst house Quocirca, which surveyed users early this year, said companies were putting off migration because they didn't like being forced to move. "The feedback we got was that companies were waking up to Bacstel-IP but many were putting it off as long as possible, some undoubtedly because they felt put out at having the deadline imposed on them," he said.