The Ultimate Checklist for Changing Payroll Providers

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You might want to change payroll providers for a number of reasons, such as price, problems with your current provider, or changing business needs.

Of course, actually making the change can be a daunting prospect. After all, payroll providers handle sensitive information and tasks, such as HMRC tax submissions and employee salaries, so it’s natural to be worried about disruptions occurring when you switch providers.

Our guide will help ease some of your worries, by laying out a clear plan for changing payroll providers. We sat down with Chung Lo, an experienced payroll advisor, to hash out the most important details about switching, and bring you the expert guidance you need to get it right.

You can also use our free quote-finding tool to be matched up with a new payroll providers – you just need to give us some brief details, such as the size of your business and your current payroll provider.

Your Checklist for Changing Payroll Providers:

Following this checklist for changing to a new provider will ensure the process is as smooth as possible:

  1. Do your research and find a new provider
  2. Check your current contract
  3. Pick the right time to change provider
  4. Notify your current provider
  5. Collect all necessary data for the new provider
  6. Coordinate tax filings and payments 
  7. Notify your employees
  8. Carry out parallel runs 

1. Do your research and find a new provider 

The first step in changing payroll providers is finding a new one. You’ll want to pick carefully, so that the benefits of changing providers outweigh any difficulties involved in the process. 

Here are some of the key factors you should look for in a new provider:

    • Costs aligned to your budget – you shouldn’t be paying any hidden costs, or struggling to keep up with your provider’s prices. When changing, you should be confident you’re making a decision that aligns with your business’s budget. 
    • More efficient service – this will streamline your business operations and make things easier for both you and your employees. You can choose a provider based on your business needs, such as a well-designed portal for employees, automatic payroll, or a full tax service. 
    • Better communication being able to communicate more effectively with your provider should help your business deal with any issues as quickly as possible. Payroll errors can cause huge disturbances, especially when it comes to employee pay or taxes.
    • Can help with the transition – you might not be a payroll expert, but your new provider certainly should be, which is why it’s important to pick a provider than guides you through the transition as part of their onboarding process.

2. Check your current contract 

If you’re tied into a contract, it may be harder to leave when you want – you might have to wait for a specific point in time. However, you can always contact your current provider to see what your options are. 

That said, many payroll providers offer flexible monthly subscriptions, which means you can leave whenever you want.

3. Pick the right time to switch 

While it’s possible to change payroll providers mid year, payroll advisor Lo told us his recommendation would be to “initiate the switch effective from April”, the start of the new financial year. This makes it a much smoother process, as year to date (YTD) reporting is cleaner. 

Changing payroll providers mid-year is still an option, but it might be a more complicated process, as you’ll need to share your YTD figures with the new provider. There’s also extra paperwork involved and, potentially, greater room for error. We’d only advise doing this if you’re encountering major issues with your current provider.

4. Notify your current provider

Once you’ve settled on a prospective date to make the switch, you’ll need to let your current provider know that you’re leaving.

This is important especially for tax purposes, and to ensure a smooth transition, as they might be able to help you collect and find all the necessary data you need to give your new provider.

5. Collect all necessary data for the new provider

Lo suggests providing the following data to your new provider: 

  • Employee details
  • Salary details
  • Bank account details
  • Company information
  • Relevant tax information

More comprehensive payroll providers may have pre-built integrations with established HR systems – but this is rare, and would still require some data cleansing.

You’ll probably be moving to a more advanced platform, which means some admin processes may no longer be relevant – great news for increasing your efficiency. 

6. Coordinate tax filings and payments 

When it comes to tax, Lo advises you to “be clear on who will be making the real-time information (RTI) submissions to HMRC and when this crosses over to the new provider” . You’ll also want to get clear on when this process switches to the new provider – knowing this date will help you avoid any duplication. 

If your new provider is full-service, you’ll need to determine the new process for capturing changes from HMRC notifications for tax codes and loan notifications.

7. Notify your employees

Notifying your employees is an important step in changing payroll providers. It should ideally be done as soon as you know the exact date of the switch, and before you carry out a run with the new payroll provider.

If the change is carried out smoothly, your employees shouldn’t experience any disruption. However, they’ll loose access to information, such as payslips, stored with the previous provider, so you should advise them to save and download important information. You should also advise them to watch out for discrepancies after the change takes place.

8. Carry out parallel runs 

You might be wondering what parallel runs are. We put the question to Lo, who says: “A parallel run is where payroll is run twice, but employees are only paid through one provider, typically the old provider.

Meanwhile, the new payroll provider processes payroll and generates any agreed reporting, but no payments are made to employees. This allows you to then check that the new payroll has been set up correctly – if it hasn’t, this period can allow for any problems to be solved.

Parallel payroll runs are a handy way to ensure a smooth switch. 

Reasons to Change Payroll Providers

There are several reasons you might want to change providers. Here are some of the most popular:

  • Bad communication – miscommunication or simply bad communication can affect the efficiency of your business. If you find it hard to get in touch with your payroll provider or get answers to your questions on time, it might be time for a change. 
  • Unreliability – your current provider might be unreliable, which could have led to severe issues for your business, such as employees not being paid on time or being paid incorrectly. 
  • Size – your business may have downsized or grown, which means you need a provider that more accurately reflects your business size and needs.
  • Price – Your current provider could have become more expensive, especially if hidden costs and charges have padded your invoice, leading you to look for a company that better suits your budget. As Lo told us: “It can be a pain to reconcile invoices to the expected cost, so it’s important to keep on top of these.”
  • Inflexibility – there are three common pay frequencies: weekly, bi-weekly, and monthly. You may want to pay your employees with multiple frequencies, whereas your provider has limited you to just one or two. 

If you haven’t yet found a new payroll provider, use the reasons why you want to make a change to help inform you on your search. Identify what’s most important to you, or the problems you currently have, so you can find a provider that’s right for your business. 

Common Mistakes to Avoid When Changing Payroll Providers

There are lots of pitfalls involved with changing payroll providers. Here are the most common mistakes you want to avoid to ensure a smooth transition to your new payroll provider:

  • Misunderstanding pricing – payroll pricing is not always straightforward. For example, there may be discounts for businesses of a certain size, or one-off charges for implementation. Make sure you know what the costs will be upfront so you aren’t hit by any unexpected charges. 
  • Not informing stakeholders – payroll affects several stakeholders and it’s important that any links to your payroll are involved in the switch. Inform all the relevant stakeholders in order to prevent any errors. 
  • Lack of integrations –if your new payroll software is being integrated with a HR system, the new provider will need to rebuild these integrations. Failing to be aware of these impacts can lead to broken reporting and data errors. 
  • Not staying on top of any unique policies – your company may have a unique company scheme that your new payroll provider will need to be able to accommodate. Before making the change, ensure the new provider can meet your business needs and, during the turnover, keep an eye on the new provider to prevent any issues with pay.
  • Running out of time – you want to make sure there’s enough time to run parallel runs between the previous payroll provider and your new provider to work through any teething issues – this eliminates the risk of employees not getting paid on time.

Expert Verdict 

You may have been avoiding changing payroll providers for fear of all the hassle that comes with it. Our checklist and expert guide should give you all the information and tools you need to carry out a fairly painless switch.

Just remember, the best time to change payroll providers is in April, the start of the new financial year. Also, make sure you’ve collected and transferred all important data, and carried out parallel runs before closing your account with your old provider.

If you’re still looking for a new payroll provider, use our free quote-finding tool to smooth along the process. We just need a few details from you, such as your company size and current payroll provider. We’ll then match you up with trusted payroll providers, who’ll contact you with tailored, no-obligation quotes.       

Written by:
Zara Chechi
Zara is a Payments Expert, specialising in writing about Point of Sale systems. With a Law Degree from City University of London, she has used her legally-honed research and analytical skills to develop expertise in the Business Services world. Featured in FinTech Magazine, she quickly became an expert in payroll, POS systems, and merchant accounts.
Reviewed by:
Headshot of Expert Market Senior Writer Tatiana Lebtreton
Tatiana is Expert Market's resident payments and online growth expert, specialising in (E)POS and merchant accounts, as well as website builders.