Most business owners stick with a single payroll provider for years, assuming all payroll providers are equal. Though payroll providers offer similar services, they are not the same. If you are even slightly dissatisfied with your current payroll provider, you should consider the merits of switching to a new provider.
Here’s a quick look at the best time to change payroll companies.
Timing is Everything
In general, the optimal times to switch payroll companies are at the beginning of a new financial quarter or the beginning of a new calendar year. These temporal transition points serve as logical opportunities to pivot from one payroll provider to the next. Schedule your payroll transition ahead of time so the current provider and the new provider can prepare accordingly, and you’ll enjoy a smooth transition.
Changing Payroll Providers at the Start of a new Quarter
There are four financial quarters in the year, each with three months. Choose to switch payroll providers at the beginning of a new quarter, provide your historical payroll information to the new provider, and you’ll make it that much easier for the new payroll specialist to use the data for timely filing.
Changing Payroll Providers at the Start of the New Year
Switching payroll providers at the beginning of the new year is arguably the best time for such a change. Wrap up payroll service with the current partner at the end of the calendar year, transfer your information to the new provider during the fourth quarter of the year coming to a close, and you’ll gracefully transition between providers.
The new provider might not require historical data if you make the transition at the start of the new year. The new payroll specialist will have the information necessary at the point in time when quarterly taxes and year-end taxes are filed.
Switching payroll providers in January is also optimal as it is a transition point in the context of employment. Plenty of businesses add and terminate employees at the start of the new calendar year, making the changes to payroll in unison. Add in the fact that most new tax laws are effective on the first of the new year, and coordinating payroll changes in unison with tax changes makes all the more sense.
Consider a Midyear Transition
Some business owners choose June or July to change payroll providers. This midpoint is the time when people tend to be on vacation or ready for a new beginning, as there is often a lull in activity thanks to the arrival of summer. The downside to switching payroll specialists at this halfway point is that you’ll generate additional work on the backend. Obtain the necessary data from your current payroll provider for transmission to the new specialist. It will also be necessary to issue refunds on quarterly taxes collected that have not yet been submitted.
Provide the new specialist with all the details of year-to-date employees along with payments to contractors, setting the stage for accurate compensation information across the entirety of the year. This is the information necessary to generate comprehensive tax filings for employees that are accurate down to the very last detail. Historical pay data must include the names of all workers and contractors, including the specific amounts paid from the start of the year up until the date of transition to the new payroll provider.
Does It Make Sense to Change Payroll Providers at Other Times?
Choose to transition to a new payroll provider at a point in between quarterly or annual transitions, and the shift will prove more difficult. It will chew up that much more time to provide your company’s historical data to the new payroll services provider.
If the transition even partially fails, the new provider won’t file the necessary reports, ultimately creating the potential for financial liability. There is also the potential for penalties that occur as a result of report inaccuracies.
When in Doubt, Coordinate the Transition With the new Payroll Provider
If you aren’t exactly sure when the best time is to switch payroll providers, reach out to the new payroll specialist you have in mind. Ask questions, pose concerns, and you’ll have a better sense of when the opportune time is to make the transition.
The best payroll specialists are willing to provide all the information you need in the form of a checklist to begin services. Provide this information as requested, coordinate the transition at a mutually beneficial time, and you’ll enjoy a relatively seamless segue to a new payroll provider.
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America’s Preferred Payroll
Contact us today to learn more about our payroll services. You can reach our team by phone at (813) 865-4205.