When it comes to payroll, it can be tempting to stick with what you’ve got simply to avoid an administrative headache. However, switching payroll companies is a lot easier than it sounds and could save you a lot of time (and money) in the long run.
Whether you’re interested in switching payroll companies ASAP, or you’re simply keeping your options open, this 10-step guide will explain everything you need to know to make the switch.
Step 1: Do your research
There’s nothing worse than going through the processes of switching payroll companies, only to find out there was a better option out there. Though it may take a little bit of extra time, doing your research will ensure that you find a provider who covers all your needs—no matter how specific those needs may be.
Once you have a shortlist of payroll providers that you're are interested in, here are 10 considerations to take into account as part of your research:
1. Type of software: Do you need a desktop or cloud-based software?
2. Ease of use: Is the software appropriate for payroll newbies or is it tailored to veteran users?
3. Specific service requirements (beyond the basics): Do you need WSIB, off-cycle payroll, wage garnishment, HR management, etc.?
4. Remittances: Does the software simply calculate the taxes for you or does it file and remit on your behalf?
5. Cost: Will you pay each time payroll is run or does the monthly fee include unlimited pay runs? Are there hidden fees for support or other features?
6. The provider’s typical customer: Does the provider service small businesses or enterprise clients?
7. Payment options: Does the platform support weekly, bi-weekly, semi-monthly, and monthly pay periods?
8. Integrations: Does the payroll software integrate with other accounting apps such as QuickBooks or Xero?
9. Customer support: What is the availability of the support team?
10. Software security: How does the provider protect your employee’s information?
While the above provides some basic considerations to take into account when choosing a new payroll provider, this list is by no means exhaustive. For instance, some people may prioritize a payroll company with a mobile app because they like to get things done on the go. For others, a beautiful interface and intuitive user experience is the top priority. It all comes down to what you consider necessities vs ‘nice-to-haves.’
Step 2: Request a demo
While combing through company websites and reading online reviews can tell you a lot, the best way to know if a payroll provider covers your ‘must-haves,’ is to request a consultation or live demo. A demo will give you a better feel of what it will be like to actually use a new payroll software. The user experience should not only be comfortable for you as an employer, but also for your employees, who will be using the software to access their pay stubs and important information such as their T4s.
As part of the demo, make sure to ask about the implementation process and what level of support will be provided in getting you up and running with the new system. Not all payroll software is created equal, therefore it's important to understand what the transition will look like with your new provider before you officially decide to make the switch.
Step 3: Review your current contract
Not all relationships are meant to last forever and if you’ve found a payroll provider that’s better suited to your needs, it may be time to “break up” with your current provider. But before you pick up the phone, take some time to review your contract with your current provider and note any important cancelation terms or restrictions. For instance, there may be cancelation fees or restrictions on how long you can access your data for after disengagement. It’s important to know these details before you actually cancel your subscription because it may change the timing of your cancellation, or you may change your mind about cancellation entirely.
It’s also important to keep in mind that some company contracts require customers to give at least 30-days notice prior to cancelation. Though many cloud-based providers will allow you to cancel right away, it doesn't hurt to give yourself a buffer period to ensure that no payrolls are missed in the process of switching payroll companies. Of course, the best way to avoid any administrative headaches is to change payroll vendors between fiscal years, at the start of a new quarter, or immediately following a pay period. This will ensure that there is less data to migrate over and fewer opportunities for error.
Step 4: Notify your current provider
If you’ve reviewed your current contract and decided to move forward with switching payroll companies, it’s finally time to notify your current provider. Having checked that you are providing the required notice, kindly let your current provider know that you will no longer be using their service.
Step 5: Request ROEs for a change of provider
When notifying your current provider that you’ll be switching payroll companies, it’s important to request ROEs for a change of provider. A Record of Employment, commonly known as an ROE, is a document that reveals important information about a person’s employment history, including how long they worked and how much they earned with an employer. Most employers know that they must issue an ROE each time an employee quits, is terminated, or experiences any other interruption of earnings.
However, it’s important to know that ROEs are also required when switching payroll companies. In this case, you need to ask your current provider to issue and submit ROEs to Service Canada after you process your last payroll with them. This is necessary in order to give your new provider access to a comprehensive per pay period breakdown of insurable earnings to prepare ROEs on your behalf. If you’ve signed an ROE Web Authorization with your old provider, you will need to notify your new provider so that they can register as the new Primary Officer and electronically submit ROEs to Service Canada on your behalf.
Keep in mind that in this particular case, ROEs do not have to be issued directly to employees unless there will be some kind of interruption of earnings.
Step 6: Request copies of all payroll register reports
In addition to requesting ROEs for a change of provider, you should also ask your current provider for payroll register reports. A payroll register report essentially provides a recap of the payments made to employees as part of payroll. This includes information such as gross pay, net pay, payroll deductions, hours works, and more. If you’re switching payroll companies mid-year, you’ll need these reports to set up your employees, both active and terminated, with your new provider.
As an employer, the CRA requires that you “keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to.” In order to make sure you have all your payroll records in order, you need to access all of this information from your current prover before the relationship is terminated. This is important because once the relationship with your current provider has been ended, you’ll have no control over when information such as your payroll register reports will be handed over to you.
Step 7: Request copies of pay stubs for all employees
As mentioned above, keeping proper payroll records is extremely important from a compliance perspective, which is why you should also make sure to request copies of past pay stubs for all employees—including contractors and terminated employees. Your new provider won’t have access to any old pay stubs, so you will need to get electronic copies of past pay stubs from your current provider in order to make sure you have a full set of records. This will be especially handy if your employees need access to their past pay stubs when you’re in the middle of making the switch to your new provider.
Step 8: Cover your year-end bases
Most payroll providers know that once a switch has been made, it is the new provider who is responsible for filing year-end reports. However, it never hurts to explicitly clarify this with your current provider. In the event that the CRA receives two sets of year-end reports from two separate providers, this could trigger an audit or a Pensionable and Insurable Earnings Review (PIER)—neither of which is a situation you want to find yourself in. Therefore, the best course of action is to put down in writing that your new payroll provider is the one who will be filing your year-end reports.
Step 9: Set up your new account
With all the information from your previous provider, you can now begin the process of setting up your account with your new provider. This will involve migrating over the information you’ve collected from your current provider, including the past pay stubs for all employees, payroll register reports, and ROEs. You will also need to migrate more basic information, such as your CRA-issued business number (BN), employee information, and a void cheque for payroll processing. If you’re a payroll veteran, you may be able to tackle this process on your own, however, most providers will happily walk you through the process. Your new provider can also ensure that all of your information is set up correctly to help you avoid any issues down the line.
Step 10: Officially terminate your services with your current provider
Once you have all the right records and documentation from your current payroll provider, it’s time to officially close your accounts. When closing your account, keep in mind that this is also a great opportunity to have an open and honest conversation with your current provider about the level of service they offer. Most payroll companies want to better serve their customers and your feedback can help them do that. Let them know what you liked about the service, as well as the areas they could improve.
Of course, you don’t need to provide a detailed explanation of why you’re switching payroll companies if you don’t want to. Sometimes switching providers is simply a matter of preference. However, keep in mind that your feedback can have an impact if you choose to give it.
By taking the above steps, you can ensure that switching payroll companies is a seamless transition, and not an administrative nightmare.
By Katherine Pendrill on Jul 2, 2019