According to G2’s Software Happiness Report, more than 52% of employees are unhappy at work because of their software. Do you find yourself feeling this way about your payroll system? Have you considered what the impact might be to your business if you don’t make a change? We’re here to tell you it is possible to change to payroll software that is a better fit for your business needs.
Switching to a new payroll software provider can save you future headaches, time, and money. However, we often hear that businesses are hesitant to switch when it’s not the beginning of the year. The truth is, switching to a new payroll provider in the middle of the year can be a great time to make a change. This article will discuss four challenges and solutions to switching payroll providers in the middle of the year.
4 Factors To Consider When Switching Payroll Software
Can we all agree payroll itself isn’t simple? There are multiple factors associated with a payroll process, like data integrations, employee forms, and time cards. On top of that, there are finance directors, tax experts, HR directors, and many other employees involved in switching systems. However, while those factors are important, they don’t need to make or break your decision to switch providers.
We’ve found the most common challenges to switching payroll systems mid-year often have logical solutions. Let’s take a look at what those challenges are and how you can overcome them this time of year.
Challenge #1: Data Errors
Discovering data errors in your payroll system is frustrating, especially when you’re ready to transition to a new solution. It’s crucial to fix those errors before processing your first payroll with a new provider so paychecks are accurate.
Consider this example: An employee moves from one state where he or she wasn’t paying state taxes to a state that collects taxes. If your new payroll provider handles tax filings and payments, they will need these data details to ensure that employee’s paychecks are issued correctly. So how can you fix these data errors so they don’t negatively impact your payroll process? You can take the following steps with your new payroll provider for a smooth and efficient transition.
Solution: Payroll History and Assessment
Providing your new payroll vendor with a complete payroll history can proactively solve any data errors before they occur. Most records are available via a payroll summary report, which provides a complete picture of your previous payroll history. If this information isn’t readily available in your previous provider’s system, you can request one directly.
Once your new provider has received your payroll and tax history, they can perform an assessment. The payroll assessment helps determine the next steps in your payroll conversion process. If your provider doesn’t usually complete a payroll assessment, we’ve listed the proper steps for them to follow:
1. Tax Catch Up
Your provider can input your tax history from your previous quarter and check to see if everything is accurate and paid-to-date. If there are any errors, your provider’s tax compliance team can help you correct them.
2. Parallel Payrolls
Once your provider imports your payroll data into your new system, they can perform a parallel payroll. This import should occur before you run payroll in the new solution to ensure everything is processing correctly.
3. History Verification
This process reviews the accuracy of paying taxes in multiple states, non-scheduled payments, and pre-tax versus post-tax deductions. If there are any errors, your payroll service provider can discuss your options to determine the best way to correct them.
Challenge #2: Multiple Pay Frequencies
Pay frequency determines how often employers pay employees. It’s not uncommon for companies to utilize multiple pay frequencies across departments and teams. The most common pay frequencies are:
This payroll period would be the most frequent as employees would receive wages each week.
This type of pay frequency occurs every other week on the same day each time such as a Friday, or a Monday.
This frequency occurs twice a month on specific dates such as the 15th and the 30th. In February the pay date would need to move forward.
With this type of pay, payroll is processed once a month, to be paid out 12 times a year.
While it is common to pay employees using multiple frequencies, some payroll systems limit employers to one or two frequencies. This system inflexibility can cause significant issues from your first payroll processing with a new vendor.
Solution: Payroll System Flexibility
A solution to this problem is to perform due diligence when vetting payroll providers. If you need a payroll system that allows you to pay employees at different frequencies, ask this question at the beginning of your search.
Find out if the payroll solutions you’re considering will enable you to create different departments or pay groups and apply different frequencies as needed. This type of payroll system flexibility will ensure a more efficient process for employee pay.
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Challenge #3: Complex Payroll Processing
We have talked to several companies about their hesitations about switching to a new payroll provider in the middle of the year. A big reason they are hesitant is that they feel their payroll process is too complex. However, once they transition to our payroll software, their reaction is:
“I wish I would have made the transition to APS sooner.”
These customers didn’t realize how smooth the payroll transition process would be. Therefore, they were afraid to switch providers in the middle of the year and decided to wait until the beginning of the following year.
Solution: Partner With A Better Payroll Provider Sooner Than Later
A recent Deloitte survey represents the irony of the complex payroll processing perception. In the survey, Deloitte defined payroll complexity as a grouping of factors. Those factors that makeup payroll complexity are tax compliance, data accuracy, and technology integration.
These factors are all the main components of most payroll provider’s platforms. Therefore, many payroll providers can handle the very payroll components that prospective customers find challenging.
If you’re still concerned about your payroll complexity, here are a couple of questions you can ask providers you’re considering:
Can You Handle Multiple Pay Rates?
Can you integrate with my existing business investments (e.g., retirement plans, general ledger packages, time tracking systems)?
Ensure your new provider can easily export data from the systems you use and import that information correctly into their solution. This process is a crucial step to a successful payroll software conversion as it ensures you’re working with accurate data from day one. Furthermore, your business will receive a better return on your investment.
Challenge #4: Complex Payroll Taxes
Now, let’s talk about payroll taxes - there’s no doubt they can be very complicated. There are several things HR staff need to manage, including:
- Forms to file each quarter and year
- Tax payments each pay period, quarter, and year
- Legislative orders and laws to follow
- Employee documents to maintain for compliance purposes
- Year-end processing
These processes can be overwhelming and challenging to manage. However, that doesn’t mean you have to wait until the beginning of the year to work with a better tax compliance partner.
Solution: Team Up With Tax Experts
Switching payroll software providers offers an added bonus: you get a team of tax compliance experts in your corner. Some payroll providers have tax compliance departments dedicated to helping their customers manage the complexities of payroll taxes. No matter how complex your payroll taxes are, partnering with a payroll and tax compliance provider is a sound decision for your business. Their knowledge can help you maintain compliance and reduce your company’s risk.
Make sure your new provider has a staff of APA-certified payroll tax experts who can help you file federal, state, and local taxes. Verify that they will assess your current payroll taxes to see if you have been potentially underpaying or overpaying taxes. You’ll save money by reducing your potential for fines and penalties.
Mid-Year Payroll Conversion Tips
Our dedicated team of tax experts wanted to offer a few additional tips for businesses looking to change payroll providers. These tips will help ensure your conversion is a smooth one, no matter what time of the year you make a change.
Avoid Double-Paying Taxes
Check with your previous payroll provider or tax service to see if they have already paid your unemployment taxes. Chances are, they have and you don’t want your new provider to pay it again!
Reduce Duplicate Filings
If your new payroll provider is also handling your payroll taxes, cancel your previous tax service to avoid duplication of filing and payments.
Remain Diligent To The End
If you plan to switch providers at the end of a quarter, be aware that the payroll assessment period will be shorter. This process is expedited to ensure your go-live date remains the same. However, even with a speedup in operations, your new provider can usually handle other tasks. Processes like tax catch-up and history verification are more straightforward for the new provider to manage if you’ve already paid your taxes.
Playing Catch Up
Most payroll providers won’t file for previous quarters since this is the responsibility of your previous provider. But your new payroll provider can make sure the data from your last system is correct.
If your new provider doesn’t utilize these processes during a mid-year payroll conversion, they may not be the right fit for your company.
If your new provider doesn’t utilize the processes mentioned above during your mid-year payroll conversion, they may not be the right fit for your company.
Why Now Is A Great Time To Switch Payroll Systems
Payroll is a complex process, and there can be many potential challenges when you’re looking to switch systems in the middle of the year. However, now is a great right time to change payroll systems when it comes to the quality of your payroll process. Knowing what challenges can arise and proactively asking your payroll vendor the right questions sets you up for a successful transition.
Whether it’s data errors or complex payroll taxes, partnering with the right provider can eliminate these challenges and the stress that comes with them. Understanding how to overcome potential hurdles paves the way for an easier and more efficient payroll transition. Furthermore, a successful payroll conversion sets your business up for long-term success.
How APS Can Help
APS has been providing payroll and tax compliance services since 1996. Our team of tax compliance experts is here to ensure your payroll information is accurate and that your taxes are paid on time. Here are a few things we do that can help you along your payroll journey:
- We develop our technology in-house, giving us advanced configuration capabilities and access to customer-driven developments.
- We offer a unique payroll experience for our customers with our reactive and proactive approach to support and success engagement.
- With our all-in-one HR and payroll software, users can automate their entire tax compliance process, including W-2s, 1099s, and year-end processing.
While mid-year is a great time to change, anytime is the right time to switch to a new and better payroll provider. No matter what time of year works best for you, APS is here to make your payroll and HR easier.
Click here to learn more about APS’ payroll solutions, and schedule your demo with us today!
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