How to Switch Payroll Companies: An 8 Step Payroll Migration Checklist

Sometimes, a business must change payroll providers to scale with them as they grow. Periodic evaluation of your payroll provider supports your organization’s continuous evolution and improvement.

What is Payroll Migration?

Payroll migration refers to the process of transitioning from one payroll solution or provider to another. It involves:

• Selecting a new payroll company
• Reviewing current contract terms and notifying your old payroll provider that you’re discontinuing the service
• Creating a payroll migration checklist
• Customizing the new system to meet your needs
• Gathering and migrating your historical payroll data
• Notifying employees with a new payroll system announcement
• Running payroll in the new system

Common reasons for switching payroll providers

There are a number of reasons you might consider switching payroll companies:

• You aren’t satisfied with your current payroll provider
• Technology has advanced but your current solution hasn’t
• The needs of your organization have changed
• Your budget has increased or decreased
• You’ve adopted other new programs that don’t interface with your payroll software
• Merger and acquisition activity
• You’re running into common payroll errors with your current solution

When is the Best Time to Switch Payroll Providers?

The best time to switch payroll providers is either the end of the quarter or the end of the year.

Preparing to onboard a new payroll provider at the end of the year allows you a fresh start. It also means you won’t need to enter employee wages from the previous year, which is a huge time-saver, especially for smaller companies. When you switch providers at the end of the quarter, you’ll still have to transfer historical employee data—but you’ll have the added benefit of processing and filing taxes for the new quarter with your new provider.

While you can change payroll vendors at any point, it’s helpful to approach the switch strategically to make the transfer a smooth one.

Switching Payroll Companies Mid-Year

While an end-of-year switch is often the ideal time, sometimes, switching payroll companies mid-year is the best option for your organization. The challenge is that you’ll need to migrate data from your current payroll software to your new solution. Thankfully, today’s HR and payroll technology makes it easier than ever to transfer historical employee and payroll data. Many vendors, including Paylocity, provide concierge services and customizable support to ensure the transition is as seamless as possible. If you do need to switch mid-year, ensure your new payroll supplier offers data migration support to minimize errors and hiccups.

Questions to Ask When Changing Payroll Providers

Asking the right questions is critical, especially when it comes down to switching payroll providers. It can help you prevent misunderstandings and errors or omissions as a result. Here are 10 questions to ask when changing payroll companies:

1. Which payroll features do you offer?
2. What support can I expect during the build phase?
3. Does your service meet requirements for privacy and security?
4. What is your fee schedule?
5. Is technical support included in our plan?
6. What is the average ticket time with your technical support team?
7. Does the software integrate with other software programs we use?
8. Does your solution accommodate our needs (employees across multiple states, special pay rules, expense management, etc.)?
9. What is your average customer retention?
10. Will employees have access to employee self-service?

Take time prior to your demo to develop a list of questions. Tailored questions that are unique to your organization are recommended.

Special Considerations for Small Business Owners

Small business owners switching payroll providers may have more to consider. If you’re a small business, ask yourself these questions to make sure you’re choosing the right payroll vendor.

1. What size company is the solution designed to serve? Some payroll solutions are designed specifically to serve small business needs. Be sure to ask how your employee count will impact the features and pricing structure available.
2. Does the software offer the right modules and features? Juggling different solutions from different providers is a challenge. An all-inclusive solution is essential to minimize your tech stack and streamline your processes.
3. Will this payroll solution grow with you? Consider the longevity of the provider’s payroll options. Ask if this payroll software is able to support more employees as your business grows, and if it has additional features or capabilities that you may not need now but will later.
4. Does the payroll vendor offer comprehensive customer support? As a small business owner, you wear many hats, and may not be an expert in the intricacies of payroll. Smaller growing companies are less likely to use multiple solutions, so finding all-inclusive small businesses payroll software is essential. Be sure your provider will offer ongoing support and service, even after the initial onboarding period.
   

How to Switch Payroll Providers

One of the most common questions HR and finance professionals ask is, “How do I switch payroll companies?” Ensure a smooth transition by following an organized, multi-step approach that uses our best practices to navigate the buying process for HR and payroll solutions.

The following information serves as a guide for switching payroll companies:

Step 1: Schedule a payroll demo

As soon as you know you want to switch payroll companies, explore your options. Don’t terminate your contract with your current payroll software provider until you’ve identified a better option. Taking a look at other options by scheduling a payroll software demo can help you identify which payroll solutions meet your needs.

Step 2: Request a proposal

Once you’ve identified the payroll solution that offers the features you need, request a proposal. Gather your payroll information in advance. Be clear about the modules you need and want. Ask for proposals that break it down so you can choose modules a la carte based on budget and priorities.

Step 3: Build a business case

If you aren’t the sole decision-maker, build a business case for changing payroll suppliers. Spend time researching your options and develop your payroll services comparison documentation. Present the payroll vendor options to stakeholders and get approval to move forward.

Step 4: Review your contract

Once you have approval (and buy-in) to switch payroll companies, review your contract. Look for your responsibilities (and penalties, if applicable) when transitioning to a new payroll company.

Step 5: Provide notice and request reports

Let your current payroll company know that you’re transitioning to a new solution. There’s a plethora of information you’ll want to request from your current provider before making the transition. Information will vary depending on your payroll, some of which may include:

• The legal name of your organization, type of business, and address
• Payroll records: employee data, payroll registers reports, payroll tax returns, and pay stubs
• Employee information so you can set up profiles within your new payroll software
• Federal Employer Identification Number
• State unemployment and insurance number
• W-2 forms
• Voided check

Step 6: Coordinate tax filings

Switching payroll companies at the end of a quarter or end of a year is easiest. Determine which company will handle tax filings based on the timing of the transition. Communicate accordingly with both your old and new providers.

Step 7: Inform key stakeholders

Tell employees and key stakeholders about the change. Be prepared to share impacts, risks, and benefits of changing payroll solutions. Provide training if applicable.

Step 8: Transition and go live

The final step is to go live with your new payroll software solution! Review the payroll journal carefully the first time you run payroll in the new system to identify and correct any discrepancies.

Is it Hard to Switch Payroll Providers?

Switching payroll companies isn’t hard. In fact, changing payroll providers is a normal, often seamless, business process that helps organizations improve. Changing payroll software can be easy when you plan ahead and collaborate with the right people.

Payroll Migration Checklist

☐ Identify providers with a positive reputation and schedule payroll software demos
☐ Request a proposal from the top one or two payroll vendors
☐ Build a business case to gain buy-in from key stakeholders
☐ Review your current contract to provide adequate notice
☐ Give notice and request copies of payroll journals and pay stubs from your current provider
☐ Agree on terms with your selected payroll partner and sign a contract
☐ Coordinate tax filings and communicate expectations with each payroll company
☐ Inform key stakeholders, including employees, of the change, and provide training where necessary
☐ Go live!

Benefits of Switching to Paylocity

Employees need to get paid, and you need time back in your day to focus on other projects. Paylocity’s all-in-one payroll solution automates and streamlines timekeeping and expense management–eliminating time-consuming spreadsheets while giving employees an experience they can count on.

Paylocity’s Commitment to Security Standards

When it comes to transitioning to a new payroll company, you can rest assured knowing we’ve got our eyes on all applicable laws and industry standards aimed at minimizing risk to your organization and employees. Paylocity is certified for compliance with ISO 27001:2013, an international security standard, ensuring that our information security practices meet or exceed industry standards. Paylocity is also fully compliant with HIPAA and GDPR to safeguard personal health information and personally identifiable information. Visit our compliance page to learn more about our top-tier partnerships, best-in-class certifications, and rigorous compliance processes.

While switching payroll companies may seem like a daunting task, with the right provider and technology, it can be painless. Be sure to follow the steps we’ve outlined and ask the right questions to ensure you’re working with the right payroll vendor for your business. Paylocity’s all-in-one platform has essential payroll tools you need and provides first-class customer support and migration services to ensure your switch is as smooth as possible.

Schedule a payroll software demo today to find out more about our offerings!