The majority of companies (87%) are thinking about switching their tech vendors—and for good reason. Now more than ever, companies need their technology to help them achieve goals, fit their budgets, and provide a frictionless user experience.
If you’re considering switching payroll providers, you’re in good company. Below we discuss why it may be time to consider changing payroll companies and the seven steps to ensure a successful transition.
Reasons to Switch Payroll Providers
Switching payroll providers can seem daunting, but many businesses find the benefits often outweigh the initial inconvenience. By identifying the right provider, you can improve efficiency, reduce costs, and ensure compliance, setting your business up for long-term success.
Here are some common motivations for making the switch:
- Outdated Technology: Outdated payroll systems can lead to inefficiencies and errors. Modern payroll solutions offer cloud-based platforms, mobile access, and advanced security features that can streamline processes and protect sensitive information.
- Hidden Fees: Unexpected fees can add up quickly and impact your bottom line. Transparent pricing is essential, and hidden costs like tax filing or direct deposit services are red flags. Payroll Today found that 40% of companies switched providers to avoid hidden fees.
- Compliance Issues: Staying compliant with ever-changing tax laws and regulations takes time and effort. If your current provider isn’t keeping up with these changes, you risk costly penalties. A reliable payroll provider should offer tools and support to ensure compliance, reducing the risk of errors and fines.
- Scalability: As your business grows, so do your payroll needs. A provider that can only scale with your business can help growth and prevent complications. Look for a payroll service that can handle your expanding workforce and offer additional features to meet your needs.
- Integration with Other Systems: Integration with other business systems, like HR and benefits software, is crucial for efficiency. If your current provider’s system doesn’t integrate well, it can lead to data silos and manual workarounds. A seamless integration saves time and reduces errors.
- Poor Customer Service: Customer service is crucial in payroll processing. If your current provider isn’t responsive or helpful, it’s time to look elsewhere. According to a survey by HR Tech News, 52% of businesses that switched payroll providers cited poor customer service as their primary reason.
8 Steps to Change to a New Payroll Provider
We get it – change is hard. Luckily, following the proper steps when switching payroll companies will help mitigate friction and create a smoother transition for all involved.
Below are our seven steps to ensure a seamless process.
1. Review Contract with Existing Provider
Before switching payroll companies, it’s crucial to understand the terms of your current contract. Understanding these details will help you avoid unexpected costs and ensure a smooth transition.
According to a report by Payroll Professionals, 30% of businesses face challenges during the switch due to overlooked contract terms.
Here’s what to review:
- Termination clauses: Check if there are any penalties or fees associated with ending your contract early. Some providers require a specific notice period.
- Obligations and services: Review the services you’re entitled to until the contract ends and ensure your current provider continues to meet these obligations during the transition.
- Data access and transfer: Determine how and when your data will be transferred to your new provider. Ensure there are no obstacles to accessing your payroll data.
2. Research and Select a New Provider
Choosing the right provider is critical. Look for one that meets your needs and offers the required features and support.
Consider the following:
- Features: Verify that the new provider offers the functions you need, now and as you grow. If you’re going to invest in the switch, consider a platform with additional features – such as position management – to boost your productivity.
- Price: Compare price points to determine which platform fits your budget. Remember to read what each platform bundle offers so you can compare prices, apples to apples.
- Implementation timeline: Determine implementation timelines and communication expectations with the new provider’s teams. Ask what the transition from implementation to support will be like after you’re fully onboarded.
- Integration: Ensure the new platform integrates with your current tech stack (or has features of all-in-one software that replaces your point solutions).
- Reputation and reviews: Read customer reviews and case studies and ask for references.
3. Notify Your Existing Provider of the Change
Once you’ve reviewed your contract and decided to switch, inform your current provider in writing. To ensure a smoother transition, you’ll need to discuss the steps for data transfer and communicate frequently.
Although it may feel a little duplicitous, it’s wise not to give too early a notice, as some providers may shut down certain parts of their system or deprioritize your customer service since you’re already out the door. Aim for 30-60 days to run dual payroll, or test payroll, live in your current provider and then one in your new provider to compare and prepare.
4. Plan the Transition Timeline
Timing is crucial when switching payroll providers. Aim to transition at the end of a financial quarter or year, or after a major payroll event, such as annual bonuses. This can simplify the process and reduce the risk of errors.
Creating a detailed transition timeline will help you manage the switch efficiently. Include key milestones, such as the end date with your current provider, the start date with the new provider, and any required training sessions for your team.
5. Gather All Information for a New Provider
The success of your switch depends heavily on how well you prepare the necessary information for your new payroll provider. This step is about ensuring that all critical data is accurate, up-to-date, and readily available.
Your new provider will need:
- Company information
- Employee details
- Demographic data
- Tax information
- Benefits data
- All payroll information
This preparation minimizes the risk of errors, ensures compliance, and helps your new provider deliver accurate payroll processing from the start.
6. Attend Trainings
As your new provider builds your payroll database, you’ll likely need to attend hands-on live training. Depending on the functionalities of your new software, there may be separate training for each component.
This step is vital for three reasons:
- You’ll learn how to use the system.
- You’ll receive documentation that you can disperse to managers and employees.
- It encourages you to audit your data. Although your new provider will conduct the original import, maintenance, and alignment of your data, training will help you understand what it looks like, its accuracy, and how it fits into the system.
7. Implement the New Software
One of the most daunting aspects of switching payroll providers is implementing the new software. Luckily, most payroll companies overlap Steps 6 and 7, so you’ll receive trainings while running parallel payroll to ensure things go smoothly.
This step involves several critical tasks that require careful attention to detail:
- Data importing: Transferring your payroll data into the new system is a complex process, which is why most providers do the original import for you. Work closely with your new provider to ensure that the data is imported correctly and securely.
- System configuration: The new software must be configured to align with your company’s payroll policies, pay schedules, and specific requirements. This might include setting up pay codes, tax tables, and benefit deductions.
- Auditing and testing: Before fully transitioning to the new system, conduct thorough audits and tests. This includes running test payrolls to verify that all data has been imported correctly and that the system is functioning as expected. Testing helps identify and resolve any issues before they affect your actual payroll.
Implementing new payroll software can be challenging, but with careful planning and attention to detail, you can navigate this process successfully.
8. Notify Employees
Of course, you’ll want to inform your employees about the upcoming changes to their pay stubs, direct deposit processes, and access to payroll information. Usually, your new payroll provider assists in this communication blast to all active employees.
It’s best to notify employees one to two weeks before entirely switching payroll providers so they can become familiar with the portal. During this time, the company can encourage employees to audit their own data to ensure all information is accurate, like direct deposit details and personal addresses.
Learn More About PrimePay
PrimePay was designed with every business size in mind. Our payroll and HR services scale with your company needs so you never miss a beat. Contact our team today to learn which bundle works best for you.
