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Switching Payroll Providers: When's the Best Time?

February 18th, 2022 | 5 min. read

By Stefanie McGee

You just can't with your current payroll provider anymore. You can't ever get someone to pick up the phone when you need help. Or they've dropped the ball one too many times getting all your employees paid on time. Or maybe your business is growing and expanding, and your current provider isn't growing with you.

Whatever your reason, you know it's time to change providers but is it a GOOD time to change?

Change is no longer a choice when the pain of your current situation, i.e. your payroll provider is no longer meeting your business' needs. Growing your business and improving your back office will require change, but it will be worth the temporary headaches as long as it ends in increased efficiency and profitability.

As an experienced payroll partner, Whirks has helped countless small businesses transition from payroll providers that no longer meets their needs and us. We understand the challenges involved in implementation, the fear of change, and the concern for your business' financial integrity. And we know you're worried that payments will get missed and tax returns won't get filed (or filed twice) during the transition.

We've written this article to answer your questions and calm your fears. After reading this article, you'll know the main reasons for changing providers, understand if switching is worth the pain for your business, and realize there's no right time of year to transition.

Main Reasons for Switching Payroll Providers

  1. Poor customer service

Once a payroll company has installed their software and trained you on using it, your main point of contact while under contract will be customer support. At Whirks, we have a team of client success specialists dedicated to answering your questions and resolving your issues as quickly as possible. Plenty of small to midsize payroll companies will assign a customer service representative to your company so you'll almost always speak to the same person.

But sometimes companies have high customer support turnover or a general hotline number to call for assistance, so you speak with a different person every time you need something. When something goes wrong with paying your employees or filing taxes, help can't wait. It's too important and your anxiety is too high to sit on hold or leave a message.

  1. Late or Incorrect Payroll or Taxes

This is the biggest No-No on this list. It's like the meme "You had ONE job to do." When you outsource payroll processing, you expect your employees to be paid on time and in full. You expect federal taxes to be withheld from your employees' wages, and those taxes to be paid to the federal government.

If your current provider can't do the bare minimum, it's time to say goodbye. If you never have service on your iPhone, you either drop your provider or Apple. If your Shipt shopper constantly brings you squished bread loves, you change to Instacart. If your employees have received late paychecks or your provider has failed to pay your taxes in full resulting in an IRS notice, it's time to change.

  1. Cost

Do you feel like you are getting your money's worth out of your relationship with your current payroll provider? Regardless of whether you decide to switch providers, it's a good idea to periodically review their services and fees and how those things fit in your overall budget.

But if you do feel like you are getting short-changed or have found a reputable company that can provide the same or better quality services than your current provider, it's time to break up with your payroll team.

  1. Wrong fit

Sure there's an ongoing global pandemic and the nation has ceased dining in restaurants or going into their offices for work. But that doesn't mean you don't need (read: want) new pajama pants or a lounge cardigan. 

You order several new pairs of PJ pants and a couple cozy cardigans online, and they finally arrive at your door! Yay!

You run upstairs to try everything on, and are sad to discover that all but one pair of the pajama pants is too small. Not only are you disappointed that you're only getting one new pair of lounge pants today, but also that you are no longer the size you thought you were. (Thanks Pandemic Eating!)

It's frustrating when clothes, shoes, or even earbuds don't fit correctly. The same goes for your payroll provider. If their services don't fit your needs now or in the future, it's time to exchange or return them for a provider that does.

Sometimes it's mismatched work cultures, lack of necessary services, or the provider is too large or too small to serve your business well. Find the best payroll provider for your industry and business. It's an investment you won't regret.

Is the change (of switching payroll providers) worth the pain?

A common refrain in my house growing up was "It's better to stick with the evil you know," which means knowing what you are up against is better than being faced with new, unknown challenges. Please don't tell my mother, but this is terrible advice!

Maintaining the status quo, particularly when it's frustrating or costly, is not the path to take. Change may be difficult, but it's temporary. Changing payroll providers (or jobs, doctors, or deodorant) might be stressful and challenging to adjust to, but it's also likely to benefit you, your business, and your employees.

If something is not working in your business, especially an outsourced service designed to make life easier, cut it loose.

When is the best time to switch payroll providers?

Despite conventional wisdom and most Google search results, the best time to change payroll providers is when you are no longer happy with the service you're receiving.

Waiting is never the right answer when it comes to paying your employees on time and accurately.

Maybe you think changing at year-end would be easier. Or at least wait to change providers until the end of a calendar quarter. Most payroll companies (via their blogs) strongly recommend waiting until a specific time of year to switch. The reasons behind this advice focus on avoiding duplication of paying employment taxes twice or having two quarterly or year-end returns filed.

A quality payroll provider (which I assume you're switching to) will perform the same transition processes whether you change providers at the end of the year or in the middle of May./strong>

Reminder: This might be the first time you've changed payroll companies, or any third-party provider. But your new provider does this every day. They will have an implementation plan ready to and a solid to-do list for you to complete to ensure accuracy, quality, and timely.

Let's say you decide to make the switch May 15, 2022. Your new payroll provider will collect and audit all your payroll and tax information from January 1, 2021 to present day. That is not a typo. They will go back to the beginning of the entire calendar year prior to the date you start.

They do this to audit all wage, federal, state, and local tax payments, in addition to employee time off, and ensure all the numbers are correct and provide themselves with a history of your payroll.

Switching Payroll Providers Preparation

Many of the payroll blogs mentioned above tell you to gather all your payroll data for six months to a year, so you can hand it over to your new provider.

Here's what they aren't telling you: If your payroll records are in digital format and/or you are switching from another provider, your new payroll company only needs the login information to your current provider to extract all the information they'll need to begin processing your payroll.

Change on your terms

The best time for you to switch payroll providers is when you are no longer satisfied with their service or product. Businesses outsource tasks because it will save them time and money. When your payroll company moves from saving you time to increasing your headaches, it's time to change, no matter what calendar month or quarter it might be.

At Whirks, we have walked hundreds of small to midsize companies through the transition from their current payroll provider to using our service. We understand the anxiety change can bring. Write out your reasons for wanting to change, determine if it's worth the temporary discomfort, and do what's best for your business regardless of the date on the calendar.

If you're unhappy with your current provider or you're wondering whether you could get more bang for your buck, set up a 15-minute call with us to talk through it.