It’s finally autumn! The fall season always brings exciting personal and professional changes. Right now, I’m selecting picks for my fantasy football league, starting bonfires at night, and drinking pumpkin spice everything. This time of year usually brings welcome changes for most, and we all seem to enjoy slowing down and enjoying the season. And often, these seasonal transitions also put us in the mindset to make other such transitions pertaining to our work or business happenings. After all, this time of year is when most owners begin budget planning for the new year, starting open enrollment season for employee benefits, and renewing or updating service engagements with tech vendors and providers.
‘Tis the season to make changes! At least that’s what our sales teams are telling us, right? You might be getting these sales calls, preparing your new year budget, or perhaps your business has endured several changes this year, and you are ready to review your business partners.
If you’re in the market for new payroll, hr, or benefit services right now, you may be wondering when the best time to make a change is. (Hint: It’s now!) but the next logical question you’ll likely ask is HOW to transition your payroll service as we transition to a new year.
As a general rule of thumb, the best time to make a payroll partner change is at the beginning of a fiscal year or the beginning of a quarter for tax filing purposes.
This article is for you if you are ready to discuss how to make a payroll migration. Here are five steps to consider as you transition payroll providers at the end of a fiscal or calendar year.
Step # 1: Do your research and negotiate a good deal
This might seem obvious, but make a short list of vendors you could work with before contacting companies.
First, check with your valued business partners, like your CPA, employee benefits broker, or a well-known business consultant in your market, for their advice. If you’re a part of a professional association, your association may have preferred partners for payroll and HR services. Many associations will often have discounts you can take advantage of as well. If you’re a franchisee owner, your franchisor will likely have recommended vendors they trust for your industry. It’s always best to talk with other owners in your network to see what vendors come to mind first.
Second, after you’ve gathered names from your peer network, be sure to review trusted software review companies like G2, Capterrra, Software Advice, Trust Radius, or Gartner Peer Insights to see what their top ratings are. If you’re a recent start-up or small local business, you can check with your local chamber of commerce and your Better Business Bureau location to see who is highly rated within your area. And let’s not forget Google Reviews and your peer network for who their vendors are.
After you’ve researched and compiled a list of 4-5 potential vendors, make your wish list on desired outcomes of a transition. Once you have a clear idea of what you need in a partner, what you lack in your current partner, and the tech specifications that will help you day-to-day, then it’s time to reach out to the vendors you’ve researched.
Be sure to ask about discounts on one-time investments, free trial services to ancillary services like onboarding, applicant tracking, and learning management platforms if that’s interesting to you and meets a business need. Many companies want to transition to new business at the beginning of the year, so be sure to ask your sales consultant what discounts, free features, or functionality you can take advantage of during your buying process. After you’ve gone through the buying process, and are ready to switch, you must establish your go-live timeline.
Step # 2: Establish a clear go-live timeline to switch payroll providers
Every business will have its way of handling your payroll migration and installation into their systems, but everyone will work towards a date to take over your payroll processing. This is what we call a “go-live” date. Ideally,you will define that date during your first meeting with their payroll team and schedule your training prior to that date. You must block four to eight hours of training time with your new payroll partner to ensure you have a firm idea about how to do things in your new platform. Remember, you will have new technology to familiarize yourself with, so make sure (if you’re the implementor) that you’ve blocked enough time in your work schedule to accommodate the training schedule.
Step # 3: Gather all necessary information
Now that you have a firm transition date, you must start collecting all the necessary info to get started. You must supply the following:
- Proof of your FEIN #
- A voided check from the account your process payroll from
- IRS forms (like Form 8655 and Form 8821)
- Admin login to your current payroll system
- Copies of your yearly quarterly tax filing reports (your 941s)
- Copies and logins to your state unemployment accounts,
- Employee profile information (like SSN, address, direct deposit info, gross salary, pay rates, etc.)
- Historical payroll information for every employee (gross payroll, deductions, etc.)
If you have an admin login to your old payroll system, your new payroll partner might prefer to pull most of this information directly from your old system to eliminate the need for .pdf or excel reports. If you have an admin login, be sure to ask your new implementation manager if you can supply that instead.
Step # 4: Notify your old payroll partner
After you’ve had your first call with your new payroll partner and established your go-live date, it’s time to cancel services with your old vendor. Many vendors only require a 30-day written notice to terminate services, so check your old service agreement to see if there are extra fees to do so. We suggest that you terminate services with your previous partner after your new partner has already collected the necessary details from your old system. This ensures that your company access, historical payroll details, and sensitive employee details aren’t erased while you still need them. Most companies will require a written cancellation notice, so send a simple email that says,
My (legal company name) + (FEIN) is terminating payroll services effective on (insert date). This is authorized by (insert name and title of contract signer or W2 signer if that’s not you.) Please let me know if you need anything else to make this effective.
Be sure to copy the previous contract signer if you weren’t the original one to ensure nothing is missed.
Step # 5: Notify your employees about the change
Last, you should provide your employees notice before making a change. New payroll companies will all have an employee self-service application of some kind, a mobile app to download, an email notification, or a place where old pay stubs are stored. You can make this easy by sending an announcement to all employees that you’re changing new payroll companies and including instructions to log in to their new portal. Your implementation specialist should have recommended email templates and instructions you can use to be sure your employees understand what’s going on and don’t lose access to their information.
It’s never easy to make a payroll transition, but if you prepare, it can be a smooth and successful transition with little headache. Even though a payroll change may feel scary during the transition, it can be an enjoyable and worthwhile move. You just have to be willing to embrace the changes and enjoy the newness of the season.
Start your research process by checking out our other article How to Choose a Payroll Provider in 2023 or head over to our 2023 Pricing Guide. And if you’d prefer to talk through your questions and concerns with a payroll specialist, go ahead and book a call!