Switching payroll companies can be an intimidating task. However, choosing the right time to switch can make for a smooth transition. In this article, we’ll share the benefits of changing payroll companies at a certain time of year, the risks of switching outside these times, and tips to streamline the process.

Benefits of switching payroll companies at the start of the year

Changing at the start of your calendar year is the ideal time to transition. It's best to conclude your service at the end of the year with your current provider and run your first payroll with the new company at the start of the year. Plus, if you choose to switch services at the start of your calendar year, you won’t have to pull in historical data – unless you choose to. When it's time to file quarterly and year-end tax forms, your new payroll company will have all the information they need. 

Benefits of switching payroll companies at the start of a quarter

The second-best time to switch payroll companies is at the start of a quarter. When you switch at the start of a quarter or midyear, you'll need to provide historical payroll data ASAP. Why? So your new payroll company can use this data to file the required reports on time.

Risks of changing outside these times

If you transition at another time, it may be more time-consuming to provide the historical data to your new provider. And if the transition doesn't go well, your new provider may not be able to file the required reports for your business. If this happens, you're liable for the penalties, not your payroll company. You could also pay penalties for any inaccuracies on these reports. Most payroll companies will provide a checklist of information they need to start services. But it's your responsibility to share the information with your new provider to hit your target pay date. 

Are you receiving the quality service you'd expect from your current payroll company? Is your provider consistently making mistakes? It may be time to switch. 

Tips for a smooth transition

1. Gather your files for the switch. When you transition, you'll need to supply your new provider with all your information. This includes:

• Business and employee profile information
• Copies of all payroll register reports
• Copies of the current year quarterly reports and tax returns

If you're organized and prepped, it makes for a simpler transfer. 

2. Review and update your data and policies. If you're ready to make a change, you should complete an internal review of your current system, processes, and data before you begin your search for a new provider. Consider the following:

• What to keep?
• What to cut?
• Are you holding on to any outdated information? Can you omit this data from the import?
• What metrics do you want to track and report?

Switching providers is an opportunity to be strategic and establish your priorities and goals moving forward. You may want a new general ledger, PTO policy, or offer more payment methods. This is a great first step when exploring new payroll companies or when preparing for your transition. 

3. Notify your current provider. Let your current provider know you'll be ending your service and what information you'll need to transition. Make sure to set a clear end date and know what needs to be done before your service ends. Maintaining clear communication about responsibilities and the timeline can help prevent potential reporting errors. Before the end date, check with your new payroll company to see if there is additional data you should get from your current provider. Once you switch, any historical data that wasn't imported could be lost. 

4. Tell your employees. Keep your employees updated on when the new system will launch and how to use it. To help with the transition, schedule training for employees and provide the resources they'll need to master the new tools. Helpful resources may include how-to sheets, login instructions, and information on any new policies and procedures. 

Ready to switch payroll companies? Let's talk about our payroll and HR services.