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What are BACS, CHAPS and FPS umbrella company payments?
Posted Jan 17, 2011
If you are contracting via an umbrella company, you will be paid either by BACS, CHAPS, or FPS. So what do these acronyms mean?
CHAPS stands for Clearing House Automated Payment System, and payments made via this system should be credited to your bank account the same day.
BACS (Bankers' Automated Clearing Services) is the most frequently used payment system, with payments reaching the recipient's account within 3 working days.
In May 2008, the Faster Payments Service (FPS) was launched, which aims to increase the speed of transfers between major banks in the UK, at no extra cost to the consumer.
Most umbrella companies pay contractors via the BACS system, although CHAPS is usually available at an extra cost (up to £35 in some cases).
Some umbrella companies pay contractors via CHAPS as standard, although you can expect to pay a higher weekly or monthly fee in return for this faster service.
Given that the FPS provides same day transfers at no extra cost, it should become the default payment system once it is fully adopted by all UK financial institutions, although the banks will presumably lose millions in lost interest as a result of using same-day payments as standard.
A limited number of umbrella companies currently offer to pay contractors via Faster Payments where available (see list of participating banks), with BACS and CHAPS payments offered where Faster Payments are not accepted by the recipient's bank.
Detailed information on each payment service can be found at BACS, and CHAPS Co (including FPS) websites.
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