Switching Payroll Companies With Confidence and a Plan

Organizations need to be able to rely on their payroll provider. Clunky, outdated technology, multiple mistakes and oversights, poor customer support, and rising costs may be cause for considering switching payroll companies.

If you’re having issues with your current payroll company, you’re not alone. An estimated 85% of organizations have problems with their payroll technologies, and 69% have issues with their payroll data.¹ Finding a new provider may be your best business decision. And when it’s time to switch payroll administration, you’ll need to do it right to avoid disruptions and adverse consequences.

To increase your chance of an ideal outcome, follow this 10-step process for switching payroll providers.

Determine your company’s needs

If you’re taking the time to switch providers, give considerable thought to what the “ideal” payroll company looks like. Do you need a comprehensive payroll processing solution, or a more scaled-back offering? Factor in what you aren’t getting from your current payroll service but would like to accomplish in changing payroll companies.

Set a timeline

Don’t charge ahead with a new payroll service at the earliest opportunity. Figure out the best time to switch companies. Try not to change payroll providers during your organization’s busy seasons or amid other large, disruptive initiatives or changes.

Review your contract

Know what you agreed to with your current payroll provider. Find out how far in advance you must give notice that you’re leaving and if your company will be on the hook for any cancellation fees. Factor this information into your strategy and timeline.

Vet and choose a new payroll provider

Take time to find a new payroll company that fits the needs you’ve established. Research multiple payroll providers and create a shortlist of the best options. From there, base your choice on how the different payroll companies measure up regarding:

• The scope of their product and service offering.
• How responsive they are in explaining their products and answering your questions now. And the amount and quality of ongoing support that you can expect after the contract’s signed.
• The level of experience they possess with companies similar to yours.
• Whether their tech stack integrates seamlessly with yours.
• What the references they provide say about their experience. (Always get references.)
• If their cost for payroll services suits your company’s budget.

Give your old provider notice

Once you’ve made your selection, send your current provider notice that you’ve decided to switch payroll providers. Include the date of cancelation in the communication, and keep a record of all related correspondence.

Set a change-over date

Talk with the employees involved with payroll along with the new payroll provider and set a date to change to the new system. Keep communications open to preempt obstacles that could hold up the process.

Collect and share your payroll data

You’ll need to share detailed payroll information with your new provider. Be prepared to provide such company information as:

• Company name and address.
• The company’s federal employer identification number (EIN).
• State and local tax identification numbers and the unemployment insurance number.
• Payroll schedule.
• Copies of required historical payroll data and previous tax forms.
• Documents authorizing the new payroll company to perform services on your company’s behalf. These will be components of the payroll solution you agreed to in your contract. They may include writing payroll checks and handling tax filings.

You’ll also need to share employee information with them. For example:

• Salaries, hourly wages, and payroll histories.
• Employee data, including names, addresses, Social Security numbers, and dates of birth.
• Employee bank account numbers and routing numbers for direct deposits.

Notify employees of the change

Blast a new payroll system announcement throughout the organization. Share that the company is switching payroll services and say a few positive things about the new provider. Do this well in advance of the change date. Send out at least 1 reminder a few days prior, as well. Giving employees plenty of notice allows them to download or request copies of any documentation they want to keep from the previous provider.

Execute the change

Sign the contract and move forward with the payroll provider transition. Be ready to answer questions and give additional information to the new provider. Once the new system goes live, work with IT to ensure the old payroll provider no longer has any access.

Keep a close eye on the new process

Devote extra attention to the payroll processes during the first few pay periods to help create a smooth transition. Address any technology glitches or errors immediately, so they don’t become bigger problems. Direct that any necessary payroll adjustments be made immediately.

If you’re experiencing problems with your current payroll company, it may be time to look at other providers. It might seem like a daunting task with all its moving parts. But changing payroll providers can increase efficiency and reduce payroll errors in the long run.

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1 Future of Payroll Survey, Ceridian