Insights, Regulation, Payments Industry, Fintech, Employment Services

Payroll On Demand

Anita Hawser By Anita Hawser on 21 November 2018   •   4 mins read
<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >Payroll On Demand</span>

Payroll on demand explained 

Why wait 30 days to get paid? After all, the workforce is changing, so doesn't payroll need to change with it? “We're entering more of a gig marketplace, zero-hours economy, which is having a big impact on payroll and how people are working today,” says Andy Valentine, Sales Director for Employment Services at Modulr.

In the new world of work, nine to five is no longer the norm. Contractors, temporary workers and new entrants to the workforce — Gen Z and millennials — want greater freedom and flexibility in terms of when they work and how they get paid. “There is a growing demand amongst employees to get paid faster,” says Valentine, “which is partly driven by the gig economy.”

With digital giants like Apple, Google and Amazon enabling consumers to pay more quickly and intuitively (using their mobile phone or digital wallets), Jakub Zmuda, Chief Product Officer at Modulr, says people expect the same level of convenience in their business lives. “If it's as simple as paying with a fingerprint or paying for an Uber taxi using your mobile, why can't I approve my time sheets and trigger a payroll payment in the same way?”

New payment rails for payroll

At Reward Strategy's November Payroll Autumn Update at the Hilton Bankside, Modulr invited  payroll services companies to debate the new way of working and its impact on payroll.

The payment part of payroll hasn't changed in decades. However, Valentine and Zmuda outlined a new way to pay, which means no more Bacs payments that take three days to process; no more manual file uploads to bank portals in order to make a payment or a lack of visibility around incoming and outgoing payments. “Now payroll is a more streamlined and seamless solution, with no manual inputting and less chance of data breaches,” says Valentine.

Bacs payment systems don't have be to the norm anymore, he explains. “We're on the road to changing that thinking, as it doesn't help payroll services companies deliver the best service to their customers.”

Andy Valentine                 Andy Valentine, Modulr: The payment part of payroll hasn't changed in decades


A New Dawn For Payroll

You don't have to be a bank anymore to deliver payment services. A new generation of e-money and payment institutions, which are regulated by the Financial Conduct Authority (FCA), are providing innovative and more automated ways to pay employees.

These new generation of payment providers are well integrated with the software payroll managers use everyday, which means payments can be triggered automatically; no more batch payment files or error and risk-prone Excel spreadsheets.

Payroll managers don't need to be tied to a three-day payments processing cycle anymore; they can trigger a payment automatically whenever they want, 24 hours a day, 365 days a year. Payments are also fulfilled more quickly as e-money and payment institutions have access to the core payment schemes, including Faster Payments.

More change is coming in the form of the European Union's Second Payment Services Directive, or PSD2, which allows authorised Third Party Providers, or TPPs, to innovate around aggregated account information and payment initiation services. Authorised TPPs include e-money and payment institutions and traditional payment providers.

What does PSD2 Mean For Payroll?

Under PSD2, Account Information Service Providers (AISPs) can aggregate bank account information, regardless of which bank that information is held with, to improve visibility, efficiency, control and reconciliation.  “Companies that process payroll and operate multiple bank accounts could potentially use AISPs to gain insights into different bank accounts and cash positions so they can better understand when and how to process payroll,” Zmuda explains. 

Kuna Zmuda ModulrJakub Zmuda, Modulr: “If it's as simple as paying with a fingerprint or paying for an Uber taxi using your mobile, why can't I approve my time sheets and trigger a payroll payment in the same way?”


Payment initiation services under PSD2 are also a powerful tool, he adds, which enable TPPs to reach into a customer's bank account(s), based on them giving their consent, to automatically trigger a payment. When combined with e-money and payment institutions'  “tech first” approach and access to the core payments infrastructure, payroll payments can be disbursed on demand, says Zmuda, in as little as 90 seconds. This is a useful tool for payroll services companies that need to make one off or emergency payments to employees/contractors.

Using these types of services, Zmuda says payroll managers can fully automate the accounts payable process; from the point of approval, to triggering the payment and receipt of the payment confirmation. Higher levels of automation minimises the need for additional staffing.

This all sounds fantastic, but how secure is it? In the UK, payment service providers and TTPs are regulated by the Financial Conduct Authority. Authorised e-money and payment institutions must hold all client funds in a separate dedicated account, as well as additional regulatory capital in order to protect customers.

A new dawn for payroll professionals is here, led by regulated e-money and payment institutions that provide a real and innovative alternative to traditional ways of making payments.


To read more about the new innovative players in payments and how they're regulated, click here.