A Checklist for Switching Payroll Companies

November 01, 2022

If you’re thinking about switching to a new payroll provider, chances are you’ve pinpointed some telltale issues with your current provider or process. Even if costly errors, poor customer service, a lack of integration with other HR tools, or user-(un)friendly software have led you back to the drawing board, you might have lingering questions about how to evaluate a new provider and determine the ideal time to transition to a new payroll system.

With these considerations in mind, we’ve created a checklist to help you evaluate a potential new provider, secure records from your current provider, prepare documents for your new setup, and launch payroll at the optimal time of year. 

Locate a New Provider with an Integrated HR Solution 

Many businesses looking to switch to a new provider want their updated payroll system to be integrated with other key HR functions. This means choosing a platform with the software, HR expertise, and customer support to help you integrate payroll with related processes like time & attendance, scheduling, benefits administration, and recruiting & onboarding. When these facets of your HR and HCM management are conducted using the same consolidated platform, employee information can be easily accessed, historical data leveraged for reporting, and potential compliance risks mitigated. In the process, switching to a cloud-based system that facilitates objective, transparent, and mobile-friendly access improves employee satisfaction and company-wide trust in your HR processes.

In addition to options for HR integration, you should also consider the following:

    • Customer Service and Ease of Communication – Determine if you will have access to a dedicated customer service representative who can assist you with troubleshooting or resolving any issues you encounter, especially early in the setup process or during tax filing.

    • Security Measures – Determine which security measures are in place to prevent breaches and protect sensitive business, personal, and employee information.

    • Expertise and Company Reputation – Ensure that the company you choose can share testimonials from company leaders within your industry and that they possess expert staff who can protect your company from legal liabilities and compliance-related concerns.

    • What’s Currently Lacking – Remember that you’re aiming to enjoy peace of mind with a new provider. If you candidly self-assess your current payroll process (and where it falls short), it can help you ask the right questions to a potential new provider to gauge how well they can address your needs and automate time-consuming or redundant processes.

Book a Demo of Payroll Services & Request a Proposal 

If you’ve found a promising new provider, the next step is to schedule a payroll demo to see how the solution they offer matches your expectations for a new payroll system. It’s also an opportunity to evaluate the company’s customer service and see (in real time) how payroll would be integrated within a consolidated platform.

If the payroll solution looks ideal for your business’ needs, the next step is to request a proposal. If you’d like a proposal that is line-itemized to allow you to pick and choose features based on the tools that are most essential to your business, be sure to communicate that to the provider.

Review Your Existing Contract

If you’re satisfied with what your new payroll provider has to offer and there’s consensus within your business about switching services, it’s time to review your existing contract to begin planning for change.

Your existing contract should lay out your responsibilities in the event of a transition to a new provider. Check to see if there are any cancelation terms (especially timeline-specific penalties or costs) or restrictions that you’ll need to consider. For instance, you may be able to cancel your subscription immediately or you may need to offer notice of 30 days or more. Some payroll providers limit the amount of time you’ll have to access your data following termination of the contract, so use this information to think practically and strategically about your next move. In the next section, we’ll help you parse through the documentation and records you’ll need to request and prepare in order to make the process easier. Handled thoughtfully, you will be able to avoid any missed payroll periods and seamlessly transition to your new provider. 

Give Notice to Existing Provider, Request Reports, and Determine Timeline

Before you let your existing provider know that you’re switching to a new provider, you should have your document and report requests in order. Our related article offers comprehensive advice on how to prepare for this phase, and highlights why it’s advisable to switch payroll providers towards the end of the calendar year to minimize the risk of errors and start the New Year (including new onboarding processes) with a clean slate.

You will likely need to request all of the following information and more from your current provider:

  • Federal employee identification number (EIN) and other business identification numbers
  • State unemployment and Insurance number
  • All payroll records, which includes pay stubs, payroll tax returns, payroll register reports, and related employee data
  • W-2 and/or W-4 forms
  • A voided check

If your business opts to switch payroll providers mid-year, the process can be more complex, requiring tax-related refunds, reports, and documentation from your current provider.

If you decide to switch towards the end of the year to prepare for a new “payroll launch” in January, you’ll need to provide all of the following information to your new provider:

  • Employee info to assist with the setup of profiles in your new payroll software; this will include employee SSN, W-4 information, pay rates, direct deposition details, and more.
  • Business information, Federal Employer Identification Number (FEIN), and other ID #’s
  • W-2 forms
  • Any payroll policy changes you’d like to implement: switching to biweekly payments, for instance.
  • Copies of applicable payroll tax returns, payroll quarterly reports, payroll registers, quarterly tax returns, etc.

The extent of information you’ll need to provide in this last category is dependent on the policies of your payroll provider and, more importantly, the time of year that you decide to switch providers. Remember that a qualified payroll provider will assist you with this process to ensure minimal issues in migrating your data and setting up your payroll system.

Tax Restarts Guide 2023 - Payday Payroll

Upgrade Your Payroll Process with Payday’s Integrated HR Solution

Want to upgrade and simplify your payroll process to start the New Year with a clean slate? Payday offers expertise, personalized customer support, and an integrated payroll solution that syncs with time & attendance, scheduling, benefits administration, and more. We make switching to our platform easy and hassle-free, helping your business boost employee satisfaction and ensure lasting legal compliance in the process. Contact us today to start our collaboration.

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