General Chat

Talking at work today with regard to pay day.
I was told years ago that if wages are paid into a bank on a specific date it needed to be in the bank before that pay day so you could draw on it the same as when it was cash in a packet, is it true, have I got it right?

Can only comment on our own circumstances.

From at least the mid 1970s, if Pay Day was say 25th of the month, then thats the day it showed up in the account. The exceptions were if the 25th was a weekend or Bank Holiday, when the pay arrived in the account on the last previous working day Mon-Fri.

Its easier now to keep track with personal on-line banking. Ours always says how much is available to spend. Sometimes its less than the statement suggests because its processing an outward transaction.

Although someone with banking experience might be able to clarify, it would seem logical that an employer would need to send out the money earlier so that it reaches the destination account on time. Might the discussion have revolved around a time when employers had to bank cheques? They used to take about 3 days to clear.

As far as I know wages are lodged at the bank about 3 days prior to "Pay Day"

Direct debits also have a 3 day offset.
The person requesting payment will apply to the acct for the DD, 3 days before it's due to be paid.

It is certainly true that the BACS system, originally introduced in 1968 to automate the payment of credits and collection of debits, has a three day cycle, as did the manual process it was designed to replace. In the example of the employer paying wages, whilst he had to initiate the payment on pay day -3, his account wouldn't be hit with the debit until the actual pay day when using BACS. Under the manual system, his account was debited immediately and the money was 'lost' in the banking system for three days.

In 2008 the Faster Payments Service (FPS) was launched which reduces the three day cycle to that of just a few hours. Since then many payments have been shifted from the BACS system, especially after the introduction of a new regulation in 2012 requiring that all standing orders be settled within a day of submission.

When I was doing payroll for a local firm 15 plus years ago . The workmen got paid on a Friday each week . I did the work on the computer on a Monday and it was transferred to the bank the next day . It had to be there before noon for them to action into the individuals banks to be there for the Friday

FPS is part of BACS which is based in Edgware, north London with a back up facility outside of London. I was systems architect for their archive, backup and recovery system back in the day.

There are transaction limits on FPS payments which do not apply to BACS which has no upper limit. In certain circumstances BACS payments can be reversed days and weeks after the original payment.

BACS / FPS paye and pensions payments will always be credited to the payee account one banking day before due date BUT will not show on the available balance using an ATM. Thus the account holder could withdraw cash / make payments on the basis of the "hidden" payment but need to be pretty sure of it otherwise poss. of overdraft fees. Alt. maintain a bigger c/a blaance but that is not an option for everyone.

It may be worth remembering that a similar rule applies to direct debits. Funds to pay the DD are "reserved" one banking day before the DD payment so that the amount appears as part of the overall balance but not "balance available". Drawings exceeding the avail. balance may therefore incur a charge even if a credit is made the same day. This rule tends to make account holders with tight balances very annoyed.