August Employers Tip – Are you ready for SEPA?

SEPA Single European Payments Area

What is SEPA?

The Single European Payments Area (SEPA) is a mandatory European Union initiative which aims to create one single integrated and standarised electronic payment market, making it easier to do business across Europe.

The SEPA region consists of 32 countries in Europe and will enable 513 million individuals to make payments within the region.   SEPA will create a single market for retail payments in euro.

How will SEPA affect my payroll?

From 1st February 2014 the current national payment transfer systems as we know them will be replaced.  Credit transfers affecting payroll and creditor payments and direct debits will be replaced by two pan-European schemes, the SEPA credit transfer scheme and the SEPA direct debit scheme.

Paycheck Plus advise clients to contact their bank to discuss the changes that may occur with the introduction of the new SEPA system.   In particular, clients should discuss the funding of their nominated payroll bank account for making salary payments as some changes may occur in terms of credit checks and deadlines for file submission.

The most significant changes will be the replacement of the current Bank Account numbers by International Bank Account Numbers (IBAN) as the primary account identifier and the replacement of the current National Sort Code with the Bank Identifier Code (BIC).

Internal operational changes will affect some bank customers, particularly in terms of funds checks on the nominated accounts for making salary payments.  For example, as a customer of AIB, you will be required to have available funds in your nominated AIB account one business day prior to the day your employees are to be paid.  Insufficient funds will result in non-payment of employees.  Paycheck Plus will not be able to over-ride this check so it is imperative that you ensure sufficient funds are in place.

With the introduction of SEPA file formats Paycheck Plus will receive your salary data and process your payments as normal.  Clients availing of our managed services will have the Payroll Team at Paycheck Plus create a salary payment file using the relevant information in a new ISO 20022 XML format .  Paycheck Plus may then submit your payment file to AIB.  On the morning before the salaries are to be paid, AIB will secure your nominated account for funds to the value of the salary payments.  If your account is not sufficiently funded, then your salary payments will not be processed and your employees will not be paid.  Paycheck Plus will be informed via iBB that your salary payments have failed to process due to insufficient funds.  However, the responsibility will lie with you, the employer, to ensure that you have adequate funds in place to meet the necessary deadlines.

Another operational change within AIB is the introduction of a control limit on the User ID which is assigned by your bank to Paycheck Plus.  The limit represents the maximum cumulative value of salary payments that we will be able to submit under your name on a given date.  The limit is based on maximum salary payments submitted by Paycheck Plus on your behalf over the past 12 months plus a 20% buffer.  Your control limit is your responsibility and you should ensure that you have adequate control limits in place to meet your salary payments including any irregular payments such as redundancies, bonuses etc.

Clients of Bank of Ireland are expected to have a conversion facility operated by Bank of Ireland for a period until they have their full SEPA system ready whereby the current file format continues for domestic payments and Bank of Ireland look after the conversion to facilitate the transfers.  Clients of Bank of Ireland are required to return an authorisaiton to their bank for the conversion service to be applied.

What are Paycheck Plus doing about SEPA?

The Payroll Team at Paycheck Plus have, for the past number of months been working directly with the various banks, software providers and the Payroll Service Providers Association to ensure that the systems and processes will be ready to meet the changes required.  AIB have actively engaged in discussions with us regarding our clients payroll processing and have recently issued letters to clients of Paycheck Plus who bank with them.  The most recent discussions with Bank of Ireland indicate that Paycheck Plus will continue to submit current file formats for domestic payments for the forseeable future with Bank of Ireland converting the data to suit the SEPA transfer requirements.  It is anticipated that by the end of March 2014, Bank of Ireland will have their new system in place which will enable Paycheck Plus upload client files which the client can then authorise for payment.  We are currently awaiting further information from Bank of Ireland about the effects of SEPA on salary payments submitted by payroll bureaus such as Paycheck Plus.  We will keep you updated as information becomes available.

What do I need to do?

We strongly recommend that you speak with your Bank Relationship Manager to discuss how SEPA will affect your daily banking requirements.  In particular, we urge you to discuss your credit limit for payroll and review cash flow requirements to ensure sufficient funds will be in place on the day before the salary payments are to be made.  It is your responsibility to ensure that your account is funded on the correct date.  If you do not have sufficient funds in your nominated payroll payment account on the Debit Date (by 10am on the morning before the salaries are to be paid) then your salary payments will not be processed and your employees will not be paid.

A recent survey of ISME members indicated that only one in four SMEs are aware of the potential impact of SEPA  on their business.  Only one in 10 have discussed the implementation with their bank.  71% of SME’s surveyed in May had yet to start preparations for SEPA.  As a client of Paycheck Plus, you can be assured that your payment files will be changed to support the new file formations well before the SEPA migration deadline of 1st February 2014.  However, the responsibility remains with you to ensure the necessary limits are in place.  If you would like to discuss the changes further, contact a member of our Payroll Team at 041 686 3000 who will be happy to advise.  Paycheck Plus – Making Payroll Easy!