Have you been thinking about switching payroll providers? Not sure where to start? We’re here to help. It’s more simple than you think to switch payroll providers, especially at the beginning of a new year.
Why switch at all?
Whether you’re tired of poor customer service, lack of integration between systems, doing it all yourself, you’re receiving tax notices in the mail that aren’t being resolved, fed up with payroll mistakes, or noticing hidden fees creeping into your invoices, many times a switch just makes sense.
When evaluating your options in the market, here are some helpful tips:
What do their customers have to say? If a payroll company has questionable or unfavorable reviews, the rest doesn’t matter. Take a look at a company’s online reviews to find out what their past and current customers have to say about their services.
What services are provided? Many companies will bundle in services in addition to payroll, such as insurances, retirement plans, additional technology for HR, time tracking, etc. For some companies, this makes sense. Be thoughtful and critical about whether it makes sense for your business to bundle multiple services with one vendor.
What is their customer service model? Did you spend hours on hold with your former payroll provider or wait days or weeks for a returned email? Will your new payroll company be responsive and proactively resolve issues as they arise? With someone as critical as payroll and business taxes, you need a reliable payroll service that you trust to keep your business compliant.
Is the technology easy to use and integrated with your other systems? In 2021, easy to use technology should be a given but unfortunately that isn’t always the case. You’ll want to find out if the technology is easy to use for employees and administrators alike. You’ll also want to consider the integration capabilities between your new provider and the other vendors in your ecosystem to determine if the change will cause unnecessary additional work for your team.
Why now?
During a mid-year switch, you will have to provide your new payroll company with year-to-date and quarter-to-date pay information since the new provider will take over annual reporting. To be clear, this is not a tremendously tedious task and companies change providers mid-year frequently. However, moving before the first payroll of the year eliminates year-to-date payroll data, making a change even simpler. In short, switching at the beginning of the year is a clean slate.
January 1st is typically associated with change for a new year - change in terms of new legislation and tax laws, updated minimum wage rates, and new payroll deductions such as health insurance. When making a payroll change, it’s smart to review all of your payroll data and completing this at the beginning of a new year ensures another set of eyes on your data, helping to ensure accuracy.
Lastly, making a “clean slate” change leaves no questions about which payroll provider is responsible for certain tasks. Everything in the prior year is the responsibility of the former provider and everything in the new year is the responsibility of the new provider.
How to switch / make a smooth transition
Start early: Plan your last pay date (check date) of the year with your old provider and your first check of the new year with your new provider. It’s important to note that payroll taxes are based on when employees are paid, not the dates the employees worked. For example, if your pay period is 12/20/21 - 1/2/22 with a pay date of 1/7/22, January 7th is your first payroll of the new year - the IRS and tax agencies only consider the payment date rather than the associated working period.
Have all of your business information ready for your new provider: In order to start your new payroll account, you will need to provide the new provider with legal business information, federal and state tax ID numbers, company bank account information, and employees’ information.
Prepare for the switch: Download copies of all payroll reports, employee records, and tax forms from your prior provider before terminating services. As a best practice, wait until you are completely set up with your new provider before terminating your former services unless there is a contract which requires notice of termination.
Ensure your prior provider will be responsible for 4th quarter filings, year-end filings, and providing W2’s to your employees. Important: Double check the mailing address on file with your old provider to ensure employees receive their W-2’s in a timely manner.
At PaySteady, we are here to help businesses make a change in the new year. If you want to learn more, reach out to our team at payroll@paysteady.com or 703-672-1225. You can also find us on Instagram (@paysteadypayroll), Facebook or LinkedIn.
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