When changing payroll providers, the most common question is about timing and when is the ideal time to make the switch. If you ask virtually any accounting professional, they’ll tell you that waiting until the end of the calendar year and running your first payroll in January is the perfect scenario.

This line of thinking stems from old ways of doing payroll, which involved a lot of manual data entry. In the past, changing payroll providers mid-year generally meant more work and more data entry for administrators.

 

However, times have changed and the rise of cloud-based software means that there are many different payroll providers out there competing for your business. As a result, many of these payroll providers will go out of their way to help you make the switch—even if it’s in the middle of the year.

 

All this to say, switching at the start of a new calendar year is ideal, but changing payroll providers mid-year is not as difficult as it used to be. To help you navigate the back-office admin that comes from changing payroll providers mid-year, we’ve put together a short guide.

 

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 Before Changing Payroll Providers

In many cases, companies that choose to change payroll providers mid-year and eager to make the switch. Whether it’s due to poor customer service or a lack of functioning features, companies are often at their wit’s end when they decide to switch.

 

But no matter how eager you may be to start working with a new provider, it’s important to do a little bit of homework. First things first, you should review your contract with your current provider take note of any cancelation fees or restrictions. This will help you plan out your transition accordingly and ensure that you give your current provider adequate notice that you’re terminating your contract. You should also plan to give yourself a buffer period between switching payroll companies to ensure that there are no missed payrolls.

Request Records of Employment (ROEs) for a Change of Provider

Whether you’re switching mid-year or at year-end, you’ll need to request ROEs for a change of provider.

 

As you probably know, a Record of Employment (ROE) is an important document that reveals key information about a person’s employment history, including how long they worked, and how much they earned with an employer. Employers must issue a ROE each time an employee quits, is terminated, or experiences any other interruption of earnings.

 

ROEs are also required when changing payroll companies. This means that you’ll need to ask your current provider to issue and submit an ROE to Service Canada for each employee after you process your last payroll with them.​ This will give your new payroll provider access to a comprehensive per pay period breakdown of insurable earnings so they can prepare ROEs on your behalf.

 

You will then need to complete and sign the ROE web authorization form with your new provider so that the company can begin preparing ROEs on your behalf. After the form has been signed, your new provider will submit a request to Service Canada to become the Primary Officer for your company's ROE Web account. Keep in mind that there can only be one primary officer account associated with any organization.

Request Payroll Register Reports & Gather Year to Dates (YTD) Amounts

You will also need to request copies of all payroll register reports up until your last payroll. A payroll register report is basically a recap of the payments made to employees as part of payroll. The payroll register is particularly important because includes all the Year to Date (YTD) amounts of employee and employer incomes and deductions—something you will need when changing payroll providers mid-year.

 

In short, YTD amounts include all of the historical payroll transactions (what net amounts have been paid out, what has been remitted to the CRA) associated with each individual employee in a given calendar year so far. Only the current year's information is necessary, so if you are switching mid-year, these amounts are very important.

 

You need the correct YTD amounts to set up your employees and ensure that you’re paying the correct amount of payroll taxes. Therefore, it’s important to ensure that YTD amounts are accurate before you run your first payroll with your new provider.


YTD amounts also need to be accurate for the T4s to be correct at the end of the year. If your YTD amounts are not correct, you may not be paying the correct payroll taxes. As you might have guessed, this will result in a Pensionable and Insurable Earnings Review (PIER)—something you definitely don’t want to deal with.

Request Pay Stubs for All Staff

In addition to the payroll register reports, you will also need to collect electronic copies of pay stubs for all staff (including any terminated employees and contractors) from within the current fiscal year. Your new provider doesn’t have access to these pay stubs otherwise, so the copies help to provide valuable information. These pay stub copies also come in handy if any of your employees need to access their past pay stubs when you’re in the midst of switching providers.

Request Year-End Reporting

Finally, if you are changing payroll providers mid-year, it’s important to clarify which provider will be taking care of your company’s year-end reporting. Generally, it is the new provider that is responsible for filing year-end reports. However, you should always clarify this with both your old and new providers just in case.

 

In the event that the CRA does receive two sets of year-end reports from two separate providers, it could trigger an audit or a PIER.

Carry Out Parallel Runs

Having gathered all the necessary information from your current provider, it’s time to carry out parallel runs. Parallel run testing simply means running your old and new payroll systems in parallel (hence the name), and then combing through the results to look for any inconsistencies. This kind of testing helps you to spot any errors before you go live with a new system. It is important to do this before terminating your account with your old provider because if the implementation fails, you’ll want to make sure you still have a way to run payroll.

 

After gathering all the necessary documents and making sure things are in working order, you can officially “break up” with your old provider and begin using your new payroll system.

 

See, we told you changing payroll providers mid-year isn’t so hard!