Switching payroll providers requires significant planning and prepping, but it doesn’t have to be difficult. As we showed in our previous blog, when the time comes to switch payroll providers, you’ll notice the signs. Payroll migration isn’t overly difficult with the right supporting you, and you can switch payroll providers at any time during the year.
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For this blog, now that you have decided it’s time to switch, how do you go about choosing a new payroll provider? And what steps do you need to take to ensure a successful transition from current provider to new payroll provider.
How to choose a new payroll provider
When you’re ready for a better payroll provider, you still need to compare options. Which features are the most important for your company? Are you planning to automate new HR processes in the future? Getting your priorities in order will help you find the right match.
Identify pro’s and con’s of your current process
High costs and frequent mistakes are common reasons to change payroll providers, but what exactly are you looking to improve? Does your current provider do anything well? Think about the services that need to be continued when switching payroll providers, not just the opportunities for improvement. Will employees or HR staff miss any perks or features of the current system?
Determine necessary features
A wish list is fine, but don’t forget to prioritize your “must have” features. What types of support or functionality were missing with your old provider? How many employees and categories of workers may need to be managed through this system? What types of integrations and accessibility features matter to your company?
Reach out to chosen providers
When you have a list of likely providers, make sure to ask the right questions. What sizes of companies are currently served by this payroll provider? Is their software scalable to grow with the future needs of your company? What level of customer support do they offer? What’s their response time on technical support issues? Will employees have self-service access? How can they assist with migration tasks associated with switching payroll providers?
Consider referrals and online reviews
Talk to other professionals in your area, particularly anyone with a similar workforce or industry. When you’ve contacted payroll providers, they should be able to provide referrals and references for an honest assessment of their service.
Online reviews are helpful for the initial phase of comparing options. Anonymous reviews from the public aren’t always reliable. You can’t always trust a high rating on the Better Business Bureau, but several unresolved complaints should raise a red flag.
See the software in action
Schedule a demo presentation to see what each payroll provider has to offer. Every software platform has its unique perks and limitations. Software should be user friendly and easy to navigate for HR and payroll staff. How many steps are needed to make common adjustments?
Request proposal and determine specifications
Each business has unique needs. When you’ve narrowed down a list of promising providers, it’s time to request a proposal. You can provide an overview of your current payroll specifications and your expected software requirements. Which of their available services will you need? You can request a la carte pricing for optional, add-on services.
Breaking up with your current provider
When switching payroll providers, you don’t want to cause unnecessary offense with your current provider, even if you’re disappointed with past service. You also don’t want to lie or be unnecessarily vague. If you say that you no longer require their payroll service, then you might accidentally give the impression that your company is going out of business, leading them to file the inaccurate paperwork on your behalf. Use clear communication to keep things professional.
Review your current contract’s details & provide timely notice
How much advance notice are you required to provide? If possible, you should make the arrangements for your new provider before notifying the current provider. A payroll provider that’s already struggling may not provide stellar service through the end of their contract. Most companies will be helpful and cooperative through the rest of your contracted period, but you don’t want to gamble with payroll.
Choose new provider
After reviewing the demo presentations and answers to your follow-up questions, which provider seems best for your company? With a major decision like payroll, be sure to include all stakeholders, including the CFO.
If they’re not already involved, use this opportunity to build a better relationship between HR and the CEO. When you explain the extra features available, the C-Suite may be open to additional spending on HR software.
Appoint a transition lead
Someone will need to keep the selection and transition process on schedule. Don’t forget to inform stakeholders and the current provider when appropriate. With all the options and considerations, it’s easy to lose track of the big picture. Collect all the paperwork that might be needed.
Payroll Migration Checklist:
☐ Shop around for the right payroll software
☐ Request proposals from the top payroll vendors
☐ Get buy-in from your stakeholders with a business report
☐ Review the deadline to provide notice for your current contract
☐ Give notice and request paperwork from your current provider (journals, pay stubs, etc)
☐ Finalize terms (and sign contract) with your new payroll provider
☐ Communicate expectations and confirm tax filing arrangements with both payroll companies
☐ Update employees (and other stakeholders) and provide and needed training
Payroll Migration Paperwork:
☐ Employee SSNs and contact info
☐ Direct deposit details for employees
☐ YTD and quarterly pay stubs
☐ Employee W2s and W9s
☐ List of benefit deductions
☐ Garnishment orders
☐ Company tax ID and bank account
☐ Payroll schedule and past tax returns
Request information from current provider
Depending on your region and provider, you may need to request Record of Employment (ROE) documents to show the breakdown of insurable earnings. Payroll register reports include wages and deductions for the year-to-date, essential for transitioning to a new provider during the year.
Tax documents will need to be provided to your new provider, even if you migrate with the new year. You should have your own copies of employee and contractor tax documents like 1099s, but your old payroll provider should also be communicative and accommodating, at least until the end of your contract.
Don’t forget to keep employees in the loop about switching payroll providers. You might even include employee representatives as stakeholders when comparing demos of different software. Workers will have their own preferences about employee portals, remote access, and self-service features. Provide updates when the current provider has been notified and when the new provider is going “live.”
Set up your account
Every company’s workforce is different, and your payroll software should allow customization. Your provider should help adapt their system to your needs, whichever products and add-ons you choose to include.
When all the data is migrated, you’ll want to conduct regular payroll audits to ensure accuracy. Make sure everyone is fully trained and ready when you run your first payroll on the new system.
Avoiding common transition problems when switching payroll providers
Even with help from your new provider, there can still be hiccups during transition. Be proactive to reduce the number of preventable mistakes.
Accounting and data transfer errors
Your new, integrated software may automate future transfers, but migration itself still requires data transfers. Audit your data and spot check figures in the new payroll system for accuracy. Ask your payroll provider about testing options before the actual payroll date.
Keep payday timeline on schedule
Minor disruptions can snowball into catastrophic delays on your first payroll with a new system. Get ahead of bottlenecks with detailed preparation. Respond decisively to resolve last-minute problems as they arise.
Payroll needs to be correct, not just fast and efficient. Spot check all inputs from employee tax information to overtime tracking. Errors like misclassifying employees will cause additional problems from one pay period to the next.
For more information about switching payroll providers, please read the previous blog in this series: Switching Payroll Providers: Why, When, and How to Do It
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