Accounting professional’s guide to switching payroll software mid-year

Why do some accounting firms switch payroll software mid-year?

Here are some considerations that may have organizations thinking it’s time for a new vendor:

• Customer service is lacking — emails go unanswered, or it takes too long to troubleshoot issues
• Their current provider is making too many mistakes in filing payroll or paying associated taxes
• Integrations don’t meet their current needs, or they start using a new tool in the middle of the year that their current payroll software doesn’t integrate with (accounting software, project management software, etc)
• The current software platform does not include HR functionality to handle back-office tasks such as PTO requests, sick days, or compensation inquiries
• The employee self-service options are difficult to use or the payroll software doesn’t provide online portals
• Some firms begin their fiscal year in the summer. If they are migrating to a different payroll software, they have a timeline in which they will research tools in March or April and budget for spending in June or July

Things to keep in mind before your mid-year move

• Your clients might pay their employees at different intervals and with different pay schedules. Will the new vendor be able to support various departments, pay groups, or pay frequencies used by your clients? It can be beneficial to confirm if any necessary specializations are in the new payroll provider’s wheelhouse.
• Make sure that the new provider has access to all the correct historical payroll data or is able to pull the necessary data from your previous provider. Will you have to migrate this data or will your new provider handle this for you (and if so, is there a cost involved?)
• How much does it cost to migrate data? Be sure to inquire about migration costs. OnPay takes care of this task without a fee (but almost all other providers will have an upcharge).
• Payroll taxes are such an important part of the equation, and Uncle Sam expects his share. It pays to double- and triple-check that your new provider can help to ensure that all taxes are accounted for and can be administered correctly and on-time. Most should be able to review any previous taxes from past quarters so that all information is accurate when migrating and tax payments continue to be made.
• When moving, you’ll still need to make sure tax filings from early in the year are handled by the provider you were using at that time. Don’t just count on it — better to be safe than sorry and double-check with them.
• Can the new vendor handle your client’s specific industry needs? For example, if your accounting firm helps agriculture or farming businesses, there are going to be payroll software companies that are unable to file Form 943. OnPay does, but keep in mind that not all providers do.
• Will you need a window of time between your old and new providers to make sure all of the employees who work for your clients get paid? In other words, will you need the previous platform to still be running to pay employees one last time so that there’s no downtime when you switch?
• See if the new vendor has an employee self-service portal where day or night workers can view pay stubs, update personal information, and access tax documents. Most modern platforms should have this available.

Get data ready to be migrated

Making sure information gets from point A to point B properly — and securely — is one of the most important parts of moving to a new payroll software company. That’s because whoever you choose to work with is going to need your clients’ employee data and year-to-date payroll reports that show the wages, deductions, and payroll taxes. This will be important so that tax forms, other documents, and records are accounted for as year-end approaches. Below is a table with information that’s likely to be a big part of this transition process.

Pro tip: Get the data in the table below ready around 30 days before moving to your new vendor.

Questions that should be asked and answered

When considering a new payroll provider, asking the following questions can help to make a smooth transition.

• Will the new provider manage the process of importing all employees’ historical payroll data into the new system (and if they do, will they charge a fee for this service)? Remember, this likely isn’t going to happen through an API or software automation between the current system and the new vendor. In other words, there’s probably no one-click magic button that moves everything over — it is very much a manual process.
• Does the new provider offer integrations with other systems you use, and can they confirm with you before making any changes?
• Does the new provider provide training so that you can see how everything works?
• Does the new provider have a dedicated account team that is easy to reach?
• What type of support do they offer?
  • Will you mostly communicate via email?
  • If you prefer speaking with a customer service rep, do they offer phone support?
  • Or live chat if you prefer to get answers this way?
  • If support is unavailable, will they have a help center where you can get most of your questions answered?

Special taxation is a reason to switch

Another reason why accounting firms use the middle of the year to switch is because there are tax considerations that their current provider is unable to assist with. For example, shareholder insurance is taxed differently than W-2 wages. Clergy housing is not taxable but must be reported on W-2s, and not every payroll company can properly account for this. Is it easy to mark clergy members as exempt from Social Security and Medicare taxes (FICA) when running payroll? Is your company FUTA or SUTA exempt, and is your current provider able to handle the calculations? Depending on the needs of your clients, it could be time for a company to switch because they have a more sophisticated setup that their current provider is unable to address.