Switching Payroll Companies | 4 Steps for Making the Switch
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Switching Payroll Companies: A How-to for the “How-come I Didn’t Switch Earlier?”

clock with hands on word "Action" showing that it's time for switching payroll companies

Unhappy with your current payroll provider? Most business owners (68%) agree that running payroll is their most difficult business task. With payroll being such a complicated but necessary business function, it makes sense that you’d want a simple solution. But, isn’t switching payroll companies hard?

Eh, there’s a little footwork, particularly when changing payroll providers mid-year. But when you have an idea of how to do it, you’ll wonder why you didn’t switch sooner.

Why you might consider switching payroll companies

There are a number of reasons you might want to reevaluate your payroll processing procedures. Here are a few reasons why you might decide to make the switch:

  • Your business is growing
  • Your current payroll processor lacks features (e.g., free direct deposit)
  • Running payroll takes too long
  • You’re spending too much money on your current method
  • The payroll company is unreliable

When it comes to payroll, you’re likely looking for a reliable method that can save you time and money without sacrificing key features. Maybe your current provider can’t give these perks to you. Or, you might just be unhappy in general.

Whatever the reason for your dissatisfaction, you may decide that it’s time to make the switch. But, you might not know when is a good time to switch.

When should you change providers?

Many employers put off switching payroll providers because they don’t know when the best time to switch is. So, when should you change providers?

Surprisingly for some, you can change your payroll provider at any time throughout the year, unless you are tied to a contract. And even then, you may be able to pay a fee and get out of your contract.

Keep in mind, however, that changing providers is easiest at the end of a year. That way, you can start the year off with a clean, payroll slate.

Another time that will simplify the payroll-switching process is at the end of a quarter. If you decide to make the switch at the end of a quarter, keep these quarter-end dates in mind:

  1. April 30
  2. July 31
  3. October 31
  4. January 31

But again, switching payroll companies mid-year is completely possible, especially if your new provider offers free setup to simplify your responsibilities and transition. Just be sure to touch base with your previous provider to specify which filings they’re going to handle for you, if applicable.

How to switch payroll

Curious about how you can take the plunge? Then you’ve come to the right place. Again, the process of switching can be intimidating if you don’t know where to start.

To help make things easier, follow some basic steps when switching payroll companies. These steps include deciding on a new provider, gathering payroll info, beginning the transition, and notifying your old provider.

switching payroll companies process

1. Decide on a new provider

First thing’s first: before you switch payroll, you should know who you’re switching to. Do some research before landing on your new dream payroll provider.

Ideally, you want a payroll system that is easy-to-use and inexpensive and has all of the features you need.

Some features to be on the lookout for include:

  • Wage and tax calculations (and overtime)
  • Free direct deposit
  • Time-off tracking
  • Multi-pay rate
  • Free payroll setup
  • Free support
  • Employee portal

You might also opt for a system that doesn’t strap you in with a long-term contract. And, maybe you want a provider who offers a free trial of their service. Make sure your new payroll provider has the features your business needs (not just the ones you want).

2. Gather all payroll information

You can start doing this before you land on your new payroll provider, but your next step is to gather payroll information.

Remember the information you had to have to run payroll with your old payroll company? Your new one needs it now.

Make sure to have your Federal Employer Identification Number (FEIN), EFTPS account information, and state and local account information handy. Don’t forget to also gather your workers’ compensation coverage info. You’ll need this when getting started with your new payroll provider.

In addition to the general employer information, you’ll also need employee-specific information. You can gather this from your previous provider.

Before you ditch your previous provider, you must have things like:

  • Employee wage, tax, and deductions information
  • Pay stubs
  • Year-to-date payroll
  • Employee time-off balances
  • Pay frequency
  • Direct deposit information
  • Employee contact information and SSNs
  • Copies of reports (e.g., Form 941)

Don’t worry about collecting “too much” data. Remember, it’s better to be safe than sorry. And more than likely, your new provider will need every bit of information you can give them for a smooth transition.

3. Begin the transition

Once you’ve got information in hand, you can start entering it into your new software.

Many employers who are switching payroll companies begin the transition before they officially shut down their old method. That way, you can go back and reference information if you need to.

Although transitioning payroll information is a great safeguard for information, it can become quite a sticky situation if you accidentally run payroll from both systems.

4. Notify your old provider

At long last, you’ve come to the final main step of the switching payroll providers process. The time to cut ties with your previous provider and start running payroll in your new system.

To do this step, simply notify your old provider. Consider putting it in writing that you’re leaving so you have documentation that you told them.

Once you’ve closed your payroll account with your old provider, you’re free to run payroll in your new system. And hopefully, you’ll be happy that you switched.

Not happy with your current payroll provider? Make the switch to Patriot Software’s online payroll today! We offer free, U.S.-based setup so you can start running payroll in no time. What are you waiting for? Join thousands of happy customers by starting your FREE trial today! 

This is not intended as legal advice; for more information, please click here.