Have you considered the impact switching payroll companies mid-quarter can have on your business? According to G2’s Software Happiness Report, more than 62% of employees don’t feel like they are meeting their work potential because of the software they’re using. The same report also points out that 1 in every 8 employees quits a job due to software. So if you’re unsatisfied with your payroll software and don’t make a change, you could be leaving room for employee dissatisfaction and low productivity.
We often hear that businesses are hesitant to switch providers when it’s not the beginning of the year. However, switching providers mid-quarter is a great way to save yourself future headaches and low production costs. That’s why we wrote this article so you can learn how to switch payroll providers no matter the time of year.
Why Would You Switch Payroll Providers Mid-Quarter?
There are several reasons you might want to switch payroll companies mid-quarter. According to a recent Global Payroll Survey Report, only 42% of respondents say that it’s easy to work with their current payroll provider. The same study also found that 58% of organizations are experiencing challenges with their current payroll provider.
Things like cost, payroll errors, and lack of features can also impact the return on investment (ROI) of your payroll platform. Maybe you’ve experienced some of these problems or other issues that have affected your payroll experience. Let’s look at a few reasons why a company might want to switch providers in the middle of a quarter.
You're Paying Too Much
A National Small Business Association study found business owners pay over $83,000 in regulatory costs in their first year of operation. Does your current payroll provider cost you excessive amounts of money in taxes and compliance fees? How about labor costs associated with manual data entry?
Even solutions that only offer paper-based checks are known to cost organizations an average of $24,450 per year. Unfortunately, when ineffective software costs your organization money, you don’t always have time to wait to switch providers.
Your Provider is Making Too Many Payroll Errors
According to a study by CareerBuilder, 75% of workers say they live paycheck to paycheck. Therefore, accurate and timely compensation is essential to keeping employee satisfaction levels high. When organizations utilize payroll systems that cause frequent errors, employees are left to fend for themselves. The result is often tri-fold. Employees take on more credit card debt, reduce their overall financial wellness, and feel less committed to the organization.
Switching payroll companies mid-quarter provides an avenue for HR to stabilize employee paychecks and reduce errors. Instead of spending hours processing payroll and correcting paychecks, payroll and HR can shift their focus to strategic initiatives. When employees feel employers are committed to their financial health, they become more committed to the organization.
You Want the Best, Most Up-to-Date Software Features
A third reason you might consider switching payroll providers mid-quarter is if your current system lacks updated features. Some payroll features and services can significantly reduce HR administration workloads and streamline payroll processes. If your organization lacks the resources needed for manual payroll and HR workloads, a software provider with updated features can help. Here are a few modern features that can make or break your payroll software experience:
Paperless Payroll
Utilizing a paperless payroll process provides your employees with various payment options and ensures accurate, timely pay. Options like direct deposit, paycards, and earned wage access (EWA) offer employees instant access to their compensation on payday - or even before when using EWA. Paperless payroll also eliminates the need to process checks manually. It reduces administrative burdens associated with paycheck errors and alleviates employee stress levels related to late paychecks.
Text Messaging
When you manage communication properly, you increase employee productivity. A Cellular Telecommunications and Internet Association study found the average response time for an email was 90 minutes compared to 90 seconds for text messages. Payroll and HR software with text message capabilities alleviate communication burdens. Employees can view timecard notifications on their smartphones while administrators streamline notifying employees of upcoming changes.
360 401(k) Integrations
These integrations help payroll or HR managers save time from inputting employee contribution data in two systems. A 360 integration provides an automated exchange of information between payroll software and an employee 401(k) program, streamlining data updates and ensuring accuracy.
Multi-Dimension Time and Attendance Tracking
Dimensions time tracking allows employees to allocate their time across locations, customers, vendors, projects, items, tasks, and more. By utilizing project time tracking categories, businesses can view employee productivity metrics and make adjustments as needed. With a more proactive approach to productivity monitoring, organizations can better control labor spending and ensure clients are billed for actual hours worked.
When To Switch Payroll Companies
When you partner with a reputable and trustworthy provider, you can switch payroll companies anytime. Instead of waiting until the middle or end of the year to change systems, there are several positives to switching payroll service providers in the middle of the quarter. One advantage of changing software mid-quarter is you reduce compliance errors sooner rather than later. Another benefit of switching payroll companies mid-quarter is streamlining your payroll process once and for all.
Even though there are several benefits to switching payroll providers mid-quarter, it can still be a complicated process. Data transfers, implementations, and compliance aren’t always easy. That’s why it’s essential to partner with a payroll provider that knows what it’s doing.
The Process to Switch Payroll Companies Mid-Quarter
The process of switching payroll mid-quarter involves a few steps. For starters, you’ll need to determine and select payroll services that are beneficial to your organization. From there, you’ll need to choose a new payroll service provider and prepare for the transition. Finally, you’ll need to end any engagement you have with your current provider.
Ultimately your mid-quarter payroll migration checklist involves five steps that make switching systems easier. Let’s take a look at how you can navigate each step of this process so you can move forward with payroll.
1. Determine the Services You’ll Require
When you are considering switching payroll providers, you must understand your organization’s needs. Does your company need general ledger integrations to track expenses? How about mobile clock-in functionality for employees? If you’re not sure, here are some services you might consider:
- Manager and Employee Self Service Mobile Apps
- Payroll Tax Compliance Services
- Garnishment Management
- Paperless Payroll
- Payroll Analytics and Reporting Dashboards
Other things to consider are the data transfer capabilities of the new provider and software features. Assessing your company’s needs will ensure your organization gets the most bang for its buck. Instead of paying for services you won’t use, you can pay for the most critical items on your list.
2. Choose a New Provider
3. Prepare to Switch
Now that you’ve chosen your preferred vendor, it’s time to switch payroll companies mid-quarter. To do this, make sure you prepare your payroll information for the transition. Planning will help you determine what your payroll process will look like from start to finish.
If you’re not sure where to begin, check your payroll summary report. This report usually provides a comprehensive list of records related to your payroll tax history. Once your new provider receives this report, they can perform an assessment.
From there, you’ll want to make sure you have a record-management process solidified, as well as employee pay frequency. Pay frequency determines how often you will pay your employees and is a necessary part of the payroll process. To understand how to set up and process payroll, read our blog: How to Process Payroll: A 7 Step Guide.
4. Officially Transition
Once you’ve determined which services you’ll need for your organization, chosen a new provider, and prepared your payroll information, it’s time to make the mid-quarter switch. Officially transitioning your payroll can be overwhelming, but it doesn’t have to be. When you follow the steps above, your transition will be smooth sailing. We’ve summarized these steps in a payroll transition checklist for you below:
- Determine the services your company needs most
- Utilize customer review platforms and awards to choose a payroll provider
- Prepare your payroll tax history, payroll process, and pay frequency
These tips will help ensure your conversion is a smooth one, so you can switch payroll providers mid-quarter with ease.
5. End Things With Your Old Provider
Now that your new payroll company has your data, it’s officially time to end things with your old provider. Completing this business relationship is the last necessary step towards a more streamlined payroll process for your organization. But, before you take that final step, here are a few things to keep in mind.
The Best Time to Switch Payroll Providers is Now
Factors to Consider When Switching Mid-Quarter
Quarterly Tax Payments
When you’re switching providers, it’s essential to consider the effect quarterly tax payments can have on your payroll process. While your old provider may have handled tax payments on your behalf, the new provider may handle them moving forward. Therefore, you will need to work with providers to settle any quarterly tax fund discrepancies. Here are a few things to keep in mind:
- Avoid Double Taxation: Verify your previous provider hasn’t already paid your unemployment taxes. If they have, you don’t want the new provider to pay them, doubling your taxes for the year.
- Ask for a Tax Assessment: Ask your new provider if they will assess your current payroll taxes so you can avoid compliance fees. In addition, a tax assessment can determine if you have been potentially underpaying or overpaying taxes with your previous provider.
- Confirm Data is Accurate: It’s the responsibility of your previous payroll providers to file for previous quarters. Therefore, most new providers won’t file previous quarters on your behalf. However, your new payroll provider can make sure the quarter-to-date information from your last system is accurate.
After receiving tax data, your current payroll company will need to compare it. To do this, they will look at quarterly totals and accumulated tax amounts received from your previous payroll provider. A W-2 analysis can compare these totals for each tax code set up in your organization’s payroll.
Year-End Tax Forms
Another factor to consider in your payroll transition is the process of collecting all your year-end tax forms. First, you must work with your old provider to gather year-to-date information for your organization. Those forms are then transferred to your new provider so you can remain compliant. If you’re not sure what forms we’re referring to, here’s a list of employer tax forms:
- Form W-2: Form W-2 is the tax form employers use to report wages paid to employees for the year. Employers must provide a W-2 to each employee and the IRS at the end of each year
- Form W-4: The W-4 is a form that employees complete and give their employers to indicate how much money to withhold from their paycheck for federal taxes.
- Form I-9: The Employment Eligibility Verification Form (Form I-9) is used to verify the identity and employment authorization of individuals hired for employment.
- 1099-NEC: Form 1099-NEC reports non-employee payments, including compensations to independent contractors.
- Form 1099-MISC: This is previously the most commonly used Form 1099. It’s now used only for miscellaneous payments made in 2020 and going forward.
- Form 1096: Form 1096 is a cover sheet used to mail forms for reporting non-employee income to the IRS.
- Form 940: This is the form employers use to report and pay unemployment taxes to the IRS.
- Form 941: This is the federal payroll tax return employers use to report wages paid to employees, tips, federal income taxes withheld from employee paychecks, Social Security taxes, and Medicare taxes.
- Form 1095-C: Form 1095-C is the IRS form employers provide employees. It details health-coverage employees had for the calendar year. Every applicable large employer (ALE) needs to furnish a Form 1095-C to each employee.
- Form 1094-C: This form reports a summary of health coverage and offers for each employer to the IRS. It also transmits Forms 1095-C to the IRS.
Contractual Obligations/Cancellation Terms
Review Multiple Licensing Options
People often fall into the trap of apples-to-apples contract comparisons. However, comparing future software licensing to your currently negotiated terms isn’t always black and white. Here are a few things to think about when comparing software:
- Fixed number of users vs. nonfixed
- All-inclusive vs. a la carte options
- Standard vs. coded configurations, etc.
Plan Reserve Budget to Run Overlapping Solutions
This plan should include licensing and service costs. Unfortunately, very few technologies fall into an easy rip-and-replace strategy. Be aware of this need and budget accordingly.
Most SaaS solutions entail a three-year to five-year subscription contract. This contract usually serves as a software lease where you rent the technology for a fraction of the price it would cost to own it. The great thing about this model is the lack of hardware that needs to be purchased and maintained. It also helps you set a budget for a specific time frame.
Ask your new provider the type of contract they require and reach out to your current vendor to review your existing agreement. Then, discuss your cancelation plans with your current provider a month to two months ahead of time. Reaching out ahead of time will give you an idea of the timelines and costs associated with the cancelation.
Note: Some providers that offer the option to switch payroll mid-quarter will not process a check in the last week of that same quarter. The reason is that payroll vendors need to reconcile tax returns in the quarter they occur. If you transition payroll mid-quarter and you want to process payroll at the end of that quarter, your new provider won’t have adequate time to perform a tax catch-up and debit funds on your behalf.
This approach provides a one-step tax process for new clients – avoiding split debts between vendors, double taxation, and compliance errors. This process ensures there is less pressure and risk to you. Therefore, it’s necessary to consider your first payroll processing date when making this transition. That way, you can ensure you meet your employees’ needs.
How We Ensure a Smooth Payroll Provider Transition
1. Fully Electronic Conversion Process
Tracking payroll data using manual, paper-based processes is a time-consuming and error-prone process. It’s inefficient and can lead to inaccurate data, especially if you’re handling multiple layers of a payroll conversion.
APS’ unified cloud-based solution provides our clients with a fully electronic conversion process. Our online document storage capabilities eliminate the need for sending or receiving paper forms. This online process reduces errors and compliance risks associated with manual entries.
2. Secure Data Transfer
APS is a SOC 1 Type 2 compliant provider. That means we regularly perform risk assessments and audits to achieve high levels of security. In addition, we encrypt all communications on APS servers and multilayer them with HTTPS for additional security.
We strive to identify and prevent risks at an early stage. For starters, we ensure all data transferred between your previous payroll provider and APS is secure. Furthermore, our logins require two-factor identifications, and we have not experienced any system breaches. This multi-level approach to security means we provide a protected solution for our customers from day one.
3. Personalized Training Process
APS offers personalized training to all new and existing customers. We train new customers on their company’s actual data during the conversion process. Training on your data ensures users have a better understanding of the system once the payroll transition is finished. Training sessions begin during the implementation phase, and each session lasts approximately 30 minutes. Depending on the services provided, the sessions could include the following:
Help doesn’t stop when the implementation process is over. We provide you with a dedicated four-person team of account specialists to help with any questions you may have. We also assign you a success coordinator who ensures you get the most return out of your investment.
We’re APS. Your workforce partner. To learn more about how we can help you switch payroll companies mid-quarter, contact us.
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