The employment services industry is a vital part of the UK’s economy - it provides a flexible workforce and support for a wide range of businesses. Typically, the industry comprises of umbrella companies, agencies for contractors and back office services such as payroll and accountancy.
According to the latest figures from Ciett, the UK has the highest number of temporary workers in Europe. With over 1.1 million temps working in the UK, that equates to about 4% of the UK workforce.
Like most industries, employment services have seen a huge amount of change in the last few years. This is in terms of the changing nature of the UK workforce and its move to digital, and in terms of regulatory changes like the upcoming amendment to IR35.
With all that change going on, it’s becoming more and more complex for businesses in this industry to manage payments in an efficient way. Fortunately, the payments industry is also going through a period of rapid change. New technology that can simplify and replace banks' payment services, and reduce costs, is becoming available.
In this article, we outline some of the ways these changes to payments technology can help the employment services industry to manage payments better.
1. Stand out from the crowd
Many firms have relied on existing relationships to drive growth in recent years. For that trend to continue, it is important to attract new business by having quality workers on your books. With the number of temporary workers fluctuating and Brexit causing uncertainty, that’s only possible by clearly differentiating your businesses from others.
One way to do this is to offer a better payment service to your customers. It’s fairly standard for workers to receive their earnings about a week or so in arrears. However, this isn’t ideal for people who work infrequently, or for those working a shift pattern.
By using a payments service like Modulr, it’s now possible to access Faster Payments easily and affordably. You can pay your contractors as quickly as 30 minutes of them finishing work on any day of the week.
Providing this level of service is a sure-fire way to win over new contractors, and to delight your current clients.
2. Reduce or remove reconciliation
Typically, opening an account has meant filling out multiple paper forms and waiting a week or so for the bank to create your account. Then, if you required another account, you’d have to repeat the process all over again. It’s too time-consuming and laborious for any business to feasibly set up several bank accounts quickly.
Now, however, new financial technology businesses are massively shortening account opening processes. That’s because they’re looking at it from the perspective of small and medium businesses, capturing due diligence information only once and getting access to the banking ecosystem via partners or ‘sponsors’. It’s now possible to almost instantly open an unlimited number of accounts – this is a real paradigm shift in payments thinking.
As account opening is becoming easier, this presents businesses with new opportunities and ways to make reconciliation easier than ever before. If you’re able to instantly open an account for every client you have on your books, this means that payments can be easily reconciled one-to-one.
Say, for instance, 3 companies send you the same payment amount for their contractors' work that week. If the companies forget to include an invoice number, or mistype the payment reference, how would you ever know who paid you? Being able to open multiple receiving accounts (one per company, for example) eliminates this problem and gives your business complete visibility of your payment flow. Combine this with instant notifications when funds arrive, and reconciliation becomes a much easier task.
Emerging payments technology means that it’s now possible for every contractor to have their own individual account. Accounts are opened in seconds, and funds can be clearly identified as belonging to an individual. It’s easy to see how you could get to the point where your business’ need for reconciliation is negated.
3. Reduce back office costs
Back office operations can be labour intensive and costly. Operational tasks like checking to see if payments have been received, processing batch files and deducting your commission from payments require a large team. This increases the potential for errors from having several manual interventions.
It’s now possible to automate a lot of payments processes. Instead of dealing with painful CSVs or batch files, your payment instructions can be completed via API (Application Program Interface). APIs are simply interfaces that allow software applications to communicate with one another. They’re being used more and more within the payments industry, and are advantageous in that they can be automated very easily. For example, you can deduct your agency’s commission automatically before paying a contractor without requiring any manual input.
The reality is that it’s now possible to get closer to straight-through processing (STP). STP means that your payments processing works perfectly in the background, without spending time on checking and correcting errors.
Payments are changing, and there are many reasons for employment services to embrace these changes. Achieving better customer service, seeing fewer errors and reducing costs are just a few of the benefits businesses could see.