How To Switch Payroll Providers In 6 Simple Steps

Considering switching payroll providers but hesitating because you may not be able to switch over at the start of the new financial year? Fret not.

Thanks to the popularity of technology and cloud-based software, you can change payroll providers at almost any time of the year. The best part is that these payroll providers are more than happy to help you manage the transition.

Why change payroll providers?

There are various situations where organisations may want to change their payroll providers midway through the year. Common reasons include poor customer service support, lacklustre software features to support the organisation’s evolving payroll needs, and cost.

Before switching between payroll providers, there are several factors to consider. Bear in mind that changing payroll providers is not as simple as switching the bank details for a handful of a staff. We are talking about an entire system migration, which includes handover periods, accurate transfer of payroll and employee records, and large-scale testing and roll-outs. While the decision to switch may not be easy, the long-term benefits that the organisation reap may be worth the effort.

When to change payroll providers

Although most payroll providers have made it easier to transition to a new payroll software platform, you will still need to allocate some time for the migration. Before switching between providers, it would be good to clarify with the vendor on the extent of work that they are able to support you with. Some are able to do all the data entry for you while others may help with the full extent of the transition.

The earlier in the financial year that you switch, the easier it is as there is less historical data to enter into the system. While this does not mean that you have to wait until the start of a new financial year to switch payroll providers, do bear in mind that you will still need to gather the payroll records for the new payroll provider. Of course, the more employees your organisation has, the longer it will take.

Steps to change payroll providers

Once you have weighed the pros and cons in changing payroll providers, here is an overview of the process in changing payroll providers. Do note that some steps may vary depending on your new payroll provider as well as your organisation’s needs.

1. Check the current contract with your existing payroll provider. Ensure that there are no early termination fees or restrictions on when you can change. If you are unsure, it is always best to clarify with your existing payroll provider before giving them notice.
2. Decide on a new payroll processing provider and request for a list of specific services that they will provide. Ensure that it is aligned with your organisation’s needs and budget before getting them in writing in your new contract.
3. Complete all necessary banking, legal and authorization paperwork. This helps to ensure that your new payroll provider is legally authorized to prepare employees’ paychecks or submit taxes on your behalf if that is included in your contract.
4. Set up an online account to access your organisation’s payroll records in the new payroll processing platform.
5. Enter your employees’ details and payroll records into the system if required. Alternatively, you may need to work closely with their customer service agent to enter your organisation’s existing payroll details into the new payroll system
6. Finally, check the uploaded details and payroll records against your historical records for accuracy. Execute a payroll parallel run to compare between the payroll records on the legacy application against the new payroll software platform

Key items to take note of during transition

While performing the above steps during the transition to a new payroll platform, there are certain situations to take note of in order to ensure a smooth and seamless migration.

Accurate year-to-date (YTD) payroll records

Accurate YTD payroll records are crucial during the data migration to your new payroll platform. This report is essentially your entire employee and historical payroll records, including income payments and deductions associated with each employee in any given calendar year. If you are switching payroll providers during the middle of a financial year, it is imperative to ensure accurate records as this will affect your year-end tax reporting. Incorrect payroll records in the existing financial year may result in wrong calculations and create unnecessary work in rectifying the errors.

Backup of electronic payslips

Electronic payslips is a common added service that most payroll software providers offer. As your new payroll provider may not have your organisation’s past payroll data, it is advisable that you backup your historical electronic payslips. As this information is saved online, this allows you to easily download the data should your employees request for it. Similarly, you may also check in with your new payroll provider as to whether they are able to store your historical electronic payslips on their cloud database.

Switching between payroll providers can be a daunting affair. However, it is good to be upfront with your existing and new payroll provider to see how they can support you during this transition. Choose your payroll provider wisely and ask appropriate questions – this can help ensure a seamless payroll migration to your new payroll platform.