Payroll

The Ultimate Guide to Switching Payroll Providers

9 January 2024

9 min read

Kelsey Breton
Kelsey Breton

Payroll is one of the most important business functions. Did you know more than 39% of Gen Z’s would never tolerate paycheck errors? It is pivotal for your organization to have an accurate, up-to-date payroll provider. Hence, switching payroll companies can be a delicate but critical move.

We get it. Switching payroll providers feels overwhelming as it requires careful planning, thorough review, and flawless execution. However, payroll migration can actually encourage growth, and save you time and money in the process. In this article, we provide a comprehensive guide on switching payroll providers complete with an easy-to-use  switching payroll companies checklist to help guide you in the process. 

What Is Payroll Migration?

switching payroll companies checklist

Payroll migration is the process of transferring payroll operations from one provider to another. For instance, switching from a manual to an automated payroll system, or changing from one payroll company to another, are all examples of payroll migration.

Common Reasons for Switching Payroll Providers

If you are unsure whether switching payroll providers is the right move, here are some common reasons why companies do it:

  • Outdated technology: As technology advances, you need a payroll solution that adapts and grows with it. Many payroll providers now offer real-time reporting, automated processing, self-service portals, HR system integrations, data storage security, encryption, and regular audits. If your existing payroll solution does not provide these solutions, it might be time to consider the switch.
  • Payroll errors: Are you constantly finding mistakes on tax forms, inaccurate employee hour tracking, overtime errors, data duplication, payroll discrepancies, and outdated tax rates? These errors could cost you tax penalties and your brand reputation, which necessitates switching payroll providers.
  • Changing needs: Perhaps your organization’s payroll needs have changed, and your payroll solutions are not able to serve them. You might be expanding teams, opening new locations, and developing complex compensation structures such as performance based pay. Switching payroll providers means you can find more scalable solutions.
  • Integration complications: Does your current payroll solution support seamless integration with your current accounting, HR, or non-wage systems? If not, finding one that supports them and saving the hidden costs of running multiple systems could be the way to go.

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  • Budget misalignments: As your company structure shifts, it could be that your budget for payroll solutions have changed and would prefer a more complex or simplified solution. Switching payroll providers enables you to find a quote that aligns with your budget and business needs.
  • Globalized payroll: Companies that expand their operations outside their local borders require payroll systems that support multiple currencies, support for localized payroll and employment laws, and automated tax deductions and calculations. If your current provider does not support the currencies you need for your globalized team, it may be time to switch to a provider who can offer these services.

Common Challenges When Switching Payroll Providers

As the process of switching payroll providers can be complex, it is important to anticipate any potential challenges and address them proactively. Keep an eye out for the following challenges, and utilize our switching payroll providers checklist to simplify the process.

  • Varying payroll cycles: If your organization does not have a single pay frequency (such as bi-weekly or monthly payments), you will need a payroll solution that can manage the payments simultaneously.
  • No non-wage integrations: Other than salaries, your payroll solution should absorb other non-wage information such as employee retirement plans accurately.
  • Communication conflicts: Establish clear and effective communications between the payroll provider and your HR team to avoid unwanted misunderstandings and errors.
  • Software compatibility: Opt for payroll providers that are compatible with your existing company software. Also, consider if they provide new access, features, and updates that will continue to work with the software in the future.

The Best Time for Switching Payroll Providers

Switching payroll providers can be done any time. However, selecting the best time for your company ensures that your payroll processes continue to run smoothly during and after the switch. 

We recommend timing the payroll migration so that your new payroll provider starts the new calendar year with you. In other words, make the switch at the end of the year. This way, the payroll company can enter the employee wages in real-time. There is no need to catch up on the previous year’s data, called “historical payroll data,” which is needed for tax filing. Without unnecessary data matching, you can save time, simplify financial records, and facilitate quarterly and year-end tax filing to the government on time. 

This attention to timing will come in handy when you are collecting data for the new payroll provider as required in the switching payroll companies checklist below.

Switching Payroll Providers Mid-Year

If you need it done before the year end, switching payroll providers between quarters is the next best option. This involves the collection of historic employee data; however, it is more straightforward than migrating during a single quarter. It keeps tax filing manageable, and your accountant will find it easier to handle.

Conversely, switching payroll providers mid-year or mid-quarter can be hectic. Your tax accountant will need to pull information from both new and old payroll providers to complete the required quarterly tax forms and meet the IRS or state government deadlines.

What happens if you need it done before the new quarter? If that is the case, your best bet would be to find an excellent payroll provider with technology that offers highly customizable support and facilitates the transfer of historical employee and payroll data.

Switching Payroll Companies Checklist

switching payroll companies checklist

With that said, there are a few steps you should be sure to check off when switching payroll companies. This switching payroll companies checklist gives you a step-by-step guide to managing your payroll migration.

1. Picking your new payroll provider

The first item on our switching payroll companies checklist is picking your new payroll provider. 

Here, identify your new payroll provider needs. Which paperwork should fall under their responsibility? Which customization features are you after?

Look for reputable payroll providers with access to the services you need. If you are unsure, try searching for payroll providers with demos or reach out to their references for further information.

Once you have considered your needs and options, narrow them down to one or two potential payroll providers, and request a proposal. Get all the necessary information you need to make an informed decision.

2. Canceling your current payroll account

With the new payroll providers options in mind, the next step on our switching payroll companies checklist is checking your current contract, and looking for cancellation terms and periods. If you are good to go, let your current payroll provider know that you are canceling your account with them and migrating to a new service provider.

3. Preparing information and documents needed by your new payroll provider

The third step of our switching payroll companies checklist is to prepare the relevant information and documents for your new payroll provider. Some of the common information requested:

  • Organization name, business type, and address
  • Employee information to set up profiles on your new payroll software
  • Payroll records, such as employee information, payroll tax returns, and payroll register reports

4. Notify relevant parties

Next up on the switching payroll companies checklist, inform relevant employees and key stakeholders on the switch. Mention when this change will come into effect and share potential results, risks, and advantages of this migration to ensure mutual understanding and avoid potential conflicts. If needed, provide relevant training for stakeholders to ensure that the team is ready for the transition.

You will find many service providers needing up to 14 days to adjust and run the payroll system effectively after the switch. 

5. Setting up your new account

The next step in our switching payroll companies checklist is to set up your new payroll account and system. After your new payroll provider has taken the necessary information and documents from your old provider, you can safely close your old account and remove the old company’s access.

Double-check that the data migration is error-free, and go live with your new payroll solution. 

But that’s not all, the final step of our switching payroll companies checklist is to go over the payroll journal carefully the first time you run it to catch and fix any errors. Also, familiarize yourself with the new contract terms to avoid unwanted fees and draw a clear line between your duties and the payroll provider’s duties.

Benefits of Switching to Omni

Switching payroll companies can appear overwhelming but with the right information such as our switching payroll providers checklist, the benefits it provides may make it worthwhile. 

Affordable, functional, and suitable for modern growing businesses— Omni is the payroll provider that your business can rely on. Our comprehensive payroll solution is specifically crafted to meet the unique requirements of your business, regardless of your geographical location. With product features like local currency support, automated tax calculations, and instant payroll reports, HR teams can simplify their payroll processes while ensuring adherence to regulatory standards.

Omni’s suite of features makes the requirements for running a compliant and efficient payroll system easy. With secure and centralized employee records, HR teams can swiftly access employment contracts and essential documents that support payroll practices. 

Our time and attendance features empower teams to automate data and produce detailed reports in minutes, making payroll calculations instantaneous and accurate. With payroll solutions that support local currencies and payment schedules, Omni offers an entire suite of solutions to make your payroll system seamless. 

If you’re ready to take your payroll management to the next level, book a demo with us today. We’ll walk you through the platform’s features and demonstrate how Omni can transform your payroll processing, saving you time, reducing administrative burden, and enhancing overall efficiency for your team. 

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Get a 14-day free trial and see how Omni can work for your business.