How to switch payroll companies in 2023

Importance of a Good Payroll System for Small Businesses

Choosing the right payroll services for your business is essential for a number of reasons. First, employee pay is vital to your company’s morale. Your employees need to know that they can rely on a consistent pay frequency. Employees want to feel confident that they’ll be paid on time and the correct amount, otherwise you risk losing valuable members of your team. 

Second, the Internal Revenue Service (IRS) has strict payroll tax requirements that all employers must follow to remain compliant. If your payroll service provider doesn’t file your employment taxes correctly and on time, you risk facing serious penalties and fees.

Reasons to Switch Payroll Companies

If your business’s payroll processing needs aren’t being met, it’s time to consider swapping to a new payroll service. Because payroll is a direct line of trust between you and your employees, you need to be able to trust that the following issues won’t happen:

Errors in current payroll system

Payroll errors can mean employees aren’t getting paid what they’re owed, they aren’t receiving the correct benefits, or they are getting their paychecks late. Making any of these mistakes when you run payroll can convince your top talent to look for a new job, as well as be a red flag for the IRS. It’s best to avoid payroll errors as much as possible, and it’s worth looking elsewhere if your payroll provider is making frequent mistakes. 

Lack of features

Your payroll provider should give you everything you need for effective and efficient payroll runs. Some of the best features you can look for in a payroll provider are:

• Run payroll on time, every time
• File your quarterly and annual payroll tax returns
• Complete reporting for new hires
• Prepare, file, and distribute employee W-2s
• Remit taxes 

If your current payroll provider doesn’t offer these features, it might be time to switch.

High costs

Any business service you sign up for should fit into your budget. If it’s more than you can reasonably afford or the costs have gone up, it’s always worth shopping around. You may be able to find a better service for a price that works for your budget.

Poor customer service

As a small business owner, you need to be able to reach the support you need when you need it — and get your questions answered. If the customer service for your current payroll provider is subpar, there are many payroll services that have excellent customer service ratings that are worth looking into. You’ll need to trust your provider to keep your payroll records secure.

Checklist for Considering a New Payroll Company

Finding the right payroll solution for your business requires you to think through many different aspects, including what you would prefer to change about your old payroll provider. Here are the steps for finding a new payroll provider. 

1. Research options and compare services

Doing your research is essential, but it doesn’t have to be a challenge. The easiest way to find your best payroll options is to use Nav. We gather the most trusted payroll providers to make it simple for you to decide which one fits your needs and budget. Look for a provider that can securely store your payroll information, take payroll runs off your plate, and finish out tax filing for your business.

2. Check customer reviews

It’s important to see what real customers are saying, so you know that other people are satisfied with their service. You can search for reviews on sources like Google, Trustpilot, or the Better Business Bureau to get a feel for the overall level of satisfaction with the payroll provider.

3. Determine the level of customer service offered by the new company

Customer service is key to ensuring you get what you need out of your payroll provider. Ask how you can reach support — some companies offer only chat while others have a phone number where you can reach a real person in minutes. Pick one that works for you. Also, make sure that other customers are satisfied with the level of support they receive by reading reviews that mention customer service. 

4. Compare costs and fees associated with the new payroll system

Make sure you understand the total cost you’ll pay, and whether it’s a monthly payment or annual payment. You may be able to get a discount if you pay annually. The most important part is to make sure you can afford the costs of the new payroll provider.

5. Check available integrations and compatibility with other systems

Many payroll providers allow you to integrate your payroll software with other online services, but not all. Integrations can simplify your processes, which saves you time. Depending on the provider, you may be able to integrate with accounting software like QuickBooks or Sage or business tools like Slack, Bamboo, and monday.com. Be sure to check before deciding.

Switching Payroll Companies

Swapping from your current payroll provider requires planning and communication to make sure your employees continue to get paid on time. You’ll want to figure out what time is best, since switching payroll providers mid-year can complicate things. We explain the best practices for changing payroll services below.

Plan the payroll migration

Once you decide on a new payroll provider and sign a contract, you’ll want to let your current payroll provider know so they can plan to hand off your payroll data effectively.

Then, think about when you want to change. First, look at your current contract to make sure that you aren’t locked in. If you can’t switch until the new quarter without facing penalties, for example, it’s likely worth waiting until your contract expires. On the other hand, if you don’t have a limiting contract, it’s best to avoid a mid-year switch if possible. The best advice is to switch at the end of the year. Start your payroll fresh at the beginning of the current year with your first payroll so you don’t have to work with the previous payroll provider the following tax season. 

Ensure you and your employees are properly trained

With any new system, you’ll need to make sure everyone on your team knows how to use it. Employees need to be able to view current pay stubs and past pay stubs, and also set up their direct deposit and more. Going through onboarding and ongoing training allows your employees to manage their own payroll needs as much as possible.

Test the new payroll system

Make sure you test before you roll out the new payroll software to ensure it works well. Communicate with the new payroll system with any questions or problems that you run into to solve them before you launch. Thorough testing helps avoid any potential issues with paying your employees on time.

Monitor and log any issues or concerns with the new company

As you start using your new payroll software, keep track of any problems or concerns you run into. If the software isn’t working properly or you aren’t quite sure how the process works, talk with your contact at the new company. Make sure your questions get addressed so the problems don’t continue happening.

Stay in contact with your current payroll company

Don’t cut off contact with your previous provider until you are fully moved over to the new service. The two companies will need to work together and with you to ensure the process goes seamlessly. Keep in touch with your old company to make sure all your payroll data is transferred over. 

Frequently asked questions

Can you switch payroll companies?

Yes. If you are unhappy with your current payroll provider, you can switch payroll companies. It does take some planning and good communication between your former payroll service and your new one, but it’s certainly possible. You may be able to get a better price and a better service for your business by switching.

Is it hard to switch payroll providers?

It shouldn’t be too hard to switch payroll services, although the time of year will determine how complicated it is. If you switch mid-year, it can mean more paperwork and increase the chances of errors, so you might think about switching at the end of the year. Your payroll services will also work with you to help you switch over.

What is the best payroll provider?

The best payroll service depends on your unique business’s needs. The right payroll provider provides the features that fit your needs, like filing payroll taxes and distributing W-2s. It also needs to fit within your business’s budget.

Can I do my own payroll?

Yes. A small business can do their own payroll runs manually, and this can work well, especially if you have only a few employees. You’ll need to manage all your employee data, calculate how much you need to withhold in taxes, and pay payroll taxes on your own. However, taking a DIY approach to payroll increases your risk of making mistakes, which can damage your relationship with employees.

How long does it take to switch payroll providers?

It shouldn’t take too long to switch payroll services. The average time to finalize the transition is between a few days and a few weeks.

How do I choose a new payroll provider?

Using Nav is the simplest way to pick the right payroll provider for your business. We gather trusted partners in one place to make your search easy and give you your best options upfront. If you would prefer to avoid hours of scrolling, head to Nav to see what your best payroll options are.