How to manage bank errors in relation to salary payments

In August 2015 thousands of employees’ salary payments were held up in a banking glitch which resulted in many individuals experiencing financial loss and additional expenses. In a situation like this who is responsible – you, the employee or their bank?

What happened?

On 28 August 2015 (which was the Friday of the August bank holiday weekend) HSBC bank experienced severe problems with its BACS payment system. As a result, thousands of employees, who are all paid by their employers on the last working day of the month, didn’t receive their salary payments as expected. This glitch caused many of them serious financial problems. For example, some HSBC customers reported going unexpectedly overdrawn, having direct debit payments rejected and not being able to make child maintenance payments in accordance with their legal obligations.

Banking issues are becoming increasingly common. For example, in 2012 payments were held up for weeks in some cases, and in June 2015 an estimated 600,000 payments, many of them salaries, were held up in RBS’s banking system. The knock-on effect of these problems can take time to untangle, leaving employees short whilst it is resolved, but who is responsible for covering any financial losses when an employee doesn’t receive their salary on time due to a banking glitch?

• Check that your BACS payment instruction is in place and is correct. This can be arranged up to 30 days in advance of the required payment date and throughout this time it remains under your control and can be cancelled at any time. As long as you’ve set a payment up, it’s the bank’s responsibility to send it.
• Provided you have set up the payment properly, it is the bank that must cover any financial losses and other out-of-pocket expenses the employee incurs should its system go down. Therefore, an employee should direct a formal complaint to the bank involved, not you. If the bank refuses to meet its obligation to reimburse all financial losses, an employee has the right to complain to the Financial Ombudsman Service. If you are confident that you set up the payment correctly, you should advise employees who approach you about such issues that it is the bank they need to speak to.

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