Switching payroll providers can have a transformative impact on your business operations, efficiency, service quality, and compliance.
However, this transition comes with its own set of challenges. Poorly managed transitions can lead to costly errors, missed payments, and compliance issues. That’s why planning and precision are essential.
This guide walks you through the process, from evaluating your current provider to successfully onboarding the new one, so your business can reap the benefits without any interruptions.
Compare payroll providers
Before selecting a new payroll provider, evaluate your current one to identify what you would like to improve or change. This ensures your new provider delivers what matters most to your business.
For example, are you seeking a more reliable cloud-based technology or a solution to streamline global payroll processes? 26% of multinational business leaders are looking for more reliable cloud-based technology from their payroll service provider, and 20% want to standardize multi-country payroll.
As you narrow down your options, review each provider’s additional services to see if they align with your business needs and objectives.
Ask yourself:
- Do you need extra features like onboarding and benefits administration?
- Do you plan on expanding your presence into other countries? If so, is that company’s payroll service available there?
If the company doesn’t offer service in your preferred location, consider using a global payroll platform. A global payroll solution can simplify multinational payroll management by accurately processing payroll, calculating taxes with precision, and staying compliant with country-specific labor laws.
Confirm compliance and provider potential
Ensuring your new payroll service company complies with all laws and regulations is crucial to avoiding legal pitfalls and maintaining payroll accurately. To confirm they are compliant and reputable, check if they have compliance certifications or relevant documentation.
This can be a Service Organization Control 2 (SOC 2) report, which assesses the provider’s security, processing integrity, confidentiality, and privacy, or a General Data Protection Regulation (GDFR) certification.
Review contract terms
Reviewing contract terms for both your old and new payroll provider is imperative. Start by checking if you’re locked into a contract for a specific period. If so, ask your current provider if there are any early termination options.
Next, examine the new provider’s contract. Ensure there are written disclosures outlining tax responsibilities and payment methods, and verify which aspects of the payroll process they take liability for.
Set a clear timeline for the transition
Once you’ve chosen your new payroll company, it’s time to define a clear timeline for rolling out the new system. Depending on the number of employees, entities, and the complexity of your payroll, some providers can complete a switchover within weeks, while others may take a few months.
The key is to ensure your company allocates enough time to properly implement the new payroll system. You need time to notify your current provider, gather and migrate all company and employee data, inform employees, and test the new system.
If you’re using payroll services in other countries without a single global payroll solution, you’ll need to replicate this process for each one. Set deadlines for every step and assign tasks to the appropriate employees for implementation.
Ensure data migration accuracy
Accurate data migration is the backbone of a successful payroll switch. Your new payroll provider will provide a list of the required information, and with your authorization, your current provider may be able to transfer your data directly.
If not, you’ll need to gather this information:
- Employer Identification Number (EIN), legal business names, and other business information
- Payroll registrations for federal, state, and local tax authorities
- Past tax filings, deposit dates, amounts, and account numbers
- Paystubs, pay registers, bank information
- Current employee list with social security numbers, addresses, wages, deductions, withholdings, etc.
Additionally, gather personnel files for resigned and terminated employees. Some states, regions, and countries require these records to be retained for a specified period. For instance, the United States Equal Employment Opportunity Commission (EEOC) requires that employment records be kept for one year and payroll records for three years.
Check with your new provider to determine what you need to stay compliant in the locations where you operate.
Communicate changes to employees
Transparency is key to minimizing confusion during a payroll switch. Start by informing employees about the upcoming change well in advance, explaining the reasons for the switch, and the benefits they can expect.
Schedule training and provide resources to help employees familiarize themselves with the new system, such as accessing the employee portal, clocking in, requesting time off, and updating their information.
Make sure they know who to contact for troubleshooting, questions, and concerns. Keep everyone informed about the transition timeline and any actions they may need to take, like updating their direct deposit and tax withholdings.
Test the new system
Thorough testing of your new payroll system is essential to uncover and address any potential issues before discontinuing your current payroll service. A best practice is to conduct parallel testing, which involves running payroll through both your existing system and the new software at the same time.
During this process, only your current payroll provider will actually disburse payments to employees, while the new provider will generate detailed reports for the same pay cycle.
It’s important to meticulously compare the reports from the new system with those from the current provider. Ensure that the calculations for wages, hours worked, tax withholdings, benefits deductions, and paid time off are consistent and accurate.
If the new payroll reports align with your requirements, you can confidently proceed with the switchover. However, there’s one more step before officially proceeding with the switchover.
Before saying goodbye to your current provider…
Make sure all tax information for the year is seamlessly transferred when switching payroll companies, especially if you’re changing mid-year or mid-quarter.
Determine who will handle your employees’ income tax forms, such as W-2s in the United States, T4 Slips in Canada, and Form P60 in Great Britain. Some providers don’t supply these documents for payments they didn’t process, so you may need to load them during the transition.
Discuss these details with your new provider to understand the process for each country where you have employees. Once everything is verified, you can finally say farewell to your old payroll service.
Expert guidance for a hassle-free switch
With Multiplier, you can manage all of your payroll needs across multiple countries through one centralized platform. By handling your payroll end-to-end, Multiplier simplifies the transition and guarantees accuracy and compliance. Meanwhile, your employees can enjoy a seamless transition in our easy-to-use platform.
Schedule a demo to learn more.
