Are you frustrated with your current payroll provider? Maybe your workers’ paychecks were late again.  

Or compliance with the Affordable Care Act (ACA) and payroll tax legislation has been a headache?

Whatever the reason, if your payroll provider no longer delivers, it’s time to welcome a reliable company that provides a seamless payroll experience and is 100% compliant. 

If you’re interested in getting help with payroll compliance, contact us

Some businesses prefer not to change payroll providers because they dread the paperwork and time-consuming process.  

But with the IRS collecting nearly $7 billion in penalties in 2021, can you afford to make payroll errors? 

This article outlines how to protect your company from costly compliance mistakes and paycheck errors by switching payroll providers. We share how to find one that suits your needs better and reveal how to change, so you can avoid being overwhelmed and make your switch seamless. 



Why Change Payroll Providers?  

Companies change payroll providers for many reasons, depending on their experience, needs, and values.  Let’s explore these reasons further to see if it’s time to switch. 

  • Does your provider charge too much? Some payroll providers neglect to mention hidden fees during initial meetings. Others charge extra for additional payroll runs. 

Look for a company that charges low up-front costs and perhaps offers a subscription plan. Find a provider that streamlines your payroll and tax management process, saving you time and money.  

Always ask for a detailed breakdown of fees and read the fine print before signing the deal to prevent monthly ‘surprises.’ 

  • Compliance concerns. Employers are held accountable for compliance with the Affordable Care Act (ACA) and payroll tax legislation. Failure to comply can lead to costly penalties.

    If you fear your provider isn’t keeping you up-to-date on relevant legal changes, it might be time to seek another provider.  

  • Payroll errors. Payroll processing errors can include late paychecks, miscalculating overtime, and failure to report all taxable compensation. With a rising cost of living, employees can’t afford to wait for a paycheck or miss out on overtime pay.  

If your provider has made frequent errors without correcting them within 24 hours, you may need to switch providers to avoid making a dent in your staff’s morale. 

  • Customer service is not responsive to your needs. Dedicated and trained staff to deal with your queries is crucial.  

If you’re at the mercy of your provider’s centralized call center, shop around for a payroll provider that puts you at the heart of an experienced team able to deal with any HR or IT needs quickly. 

Whatever the reason may be, changing to a payroll provider you trust can potentially save you thousands. 

What to Look For In a Payroll Provider  

Are you contemplating a switch? Consider these factors. 

  • Current needs vs. growing needs 
    When evaluating what your company needs from a payroll provider, try to predict those needs five or ten years from now.  

With employee growth and possible expansion, you’ll need a provider that maintains all tax rates, tax brackets, and statutory limits to keep you tax-compliant

  • Experience with your current provider (likes and dislikes) 
    Listing the pros and cons of your provider will help you establish what features and benefits are vital for the growth and success of your business. With this list in hand, evaluating what other providers offer will be easier.  

  • Cost 
    Fees can differ widely. Cheaper in the short term might cost you more later. Always check for hidden charges and whether you need to negotiate future add-ons before signing a contract. 

  • Compliance and Legal Issues 
    Pay Compliance with the FLSA (Fair Labor Standards Act) is essential. If you don’t comply, workers can take you to court. The potential for larger claims- with other workers joining, is enormous. Working with a provider that keeps you FLSA compliant helps you avoid considerable legal fees.  

  • Software 
    Evaluate software thoroughly; ask for demos to ensure dedicated staff will feel comfortable using it. Also, your data must be secure, safe, and compliant.  

Ensure your provider can protect and encrypt your data and customize security rights for individual staff members. 

When to Change Payroll Providers  

The best time for a seamless transition is at year-end for tax purposes, allowing your new payroll provider to easily track taxes and other paperwork and send January paychecks out on time.   

However, should you miss that window, aim for the end of the quarter. This way, the new payroll provider can issue their first paycheck at the beginning of the next quarter. 

If neither option works, you can make the switch any time, provided you get all the paperwork in place, ensuring employees receive their next paycheck on time.  

This process should be straightforward If you move from one cloud-based system to another. 

5 Steps to Change Your Payroll Provider

Once you have decided on your new payroll provider, follow the below steps to switch without a hitch. 

1 – Get In Touch With Your Current Payroll Provider  

Let them know you want to change payroll providers and check what’s involved. How long is the notice period? Does it have to be in writing? Are there fees or any obstacles to consider? Be careful. Thoroughly review all information prior to cancellation. 

2 – Find a New Payroll Provider 

Consider your current and future needs. Think about cost, compliance & legal issues, software, and experience when looking for a new provider. Once you’re happy to let your new provider take on your payroll, settle on a starting date together, giving both providers plenty of time to ensure a smooth transition. 

3 – Transfer Business Information 

Check with your new provider about the required paperwork. Consider your organization’s legal name and details, Federal Employer Identification Number (EIN), tax ID numbers, payroll schedule, etc.  

4 – Cancel Your Old Contract 

It’s recommended you cancel your current contract only after you have everything in place with your new provider. And don’t forget to: 

  • Cancel all their access authorizations 

  • Decide and communicate which provider will issue W-2s at year-end 

5 – Get Started With Your New Payroll Provider  

Before running the first payroll with your new provider, verify if the data in the new system is correct with your current data. Once everything checks out, you’re all set! 

Final Thoughts

A reliable payroll provider that meets all your growing needs is one that remains compliant and guides your business through complex legal and tax issues. If that doesn’t sound like your current provider, it might be time to say goodbye.  

However, you may be hesitant to change payroll providers because the thought of the time and paperwork involved can be overwhelming.  

Luckily, Cloud technology makes it easier to transfer data. Once you follow our guide above and allocate time to transition, switching will be easier than you think. 

If you’d like to speak to an HR representative about your business, contact us.  

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