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

March 05, 2021

Paylocity is an all-in-one payroll solution offering features like payroll, benefits, and more. Learn about how seamless switching payroll providers can be.

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Sometimes, a business must change payroll providers to grow and succeed. Periodic evaluation of your payroll provider supports 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 provider
  • Customizing the system to meet your needs
  • Migrating your historical data
  • Resumption of 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

Questions to ask when changing payroll providers

Asking the right questions is critical. It can help you prevent misunderstandings and errors or omissions as a result. Here are 10 questions to ask when choosing a payroll provider:

  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. Adding questions unique to your organization is recommended.

How to switch payroll companies

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. This Switching Payroll Companies Checklist serves a guide.

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 provider until you’ve identified a better option. Taking a look at other options by scheduling a payroll demo can help you identify which payroll solutions meet your needs.

Step 2: Request a proposal

Once you’ve identified the payroll service 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. Present the options to stakeholders and get approval to move forward.

Step 4: Review your contract

Once you have approval (and buy-in) to switch payroll systems, 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 provider know that you’re transitioning to a new solution. Request copies of important payroll records like employee data, payroll register reports, and pay stubs.

Step 6: Coordinate tax filings

Switching payroll companies mid-year, end of quarter, or end of 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. Switching payroll companies mid-quarter is not recommended.

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 solution! Review the payroll journal carefully the first time you run payroll in the new system to identify and correct any discrepancies.

Special considerations for small business owners

Small business owners switching payroll providers may have more to consider. First, what size company is the solution designed to serve? Solutions designed to serve large companies are rarely realistic for small businesses. Second, does the software offer the right modules and features? Small businesses are less likely to use multiple solutions, so finding an all-inclusive program is essential.

Is it hard to switch payroll providers?

Switching payroll providers 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 payroll providers with a positive reputation and schedule software demos

☐ Request a proposal from the top one or two payroll providers

☐ 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

☐ 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 choosing Paylocity

Paylocity is an all-in-one payroll solution offering features like payroll, benefits, and more. If you need payroll, timekeeping, or expense management Paylocity can deliver. Our focus on people and quality are evident through our cutting edge solutions and offerings.

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