Changing Payroll Service and Options: How to Switch Payroll Providers and Services

Payroll is a time-consuming task—one many employers would rather not perform. Consequently, employers outsource their payroll to a payroll service. The payroll provider handles the entire payroll processing, including tax processing, direct deposit and reporting services options. In some instances, the provider handles benefits administration such as 401(k) and medical benefits. For various reasons, such as poor service or a growth in his company, the employer might wish to change his payroll service and/or options.

Examine Current Payroll Service and Options

The employer should first examine his current options. If he only needed basic payroll processing in the past, but now requires reporting and benefits administration services, he should see if his current provider offers these options. If the provider has provided him with satisfactory service and has these options available, he should consider extending his relationship with them. If they do not offer these options, then it is best to change providers.

Examine New Payroll Service and Options

Ask the new provider about their options. For instance, if the current payroll provider has a small staff and a large clientele, which results in lengthy response time during payroll issues, the employer might be more concerned with quality customer service. Ask the new company how many payroll professionals it has on staff and their response rate. Call the company a few times; see how many times the phone rings before someone answers and how quickly connection with the appropriate person occurs.

Look into the new options. For instance, if the employer does not have a direct deposit option but is interested in one, he should ask the new provider precisely when direct deposits are made to the bank. Typically, direct deposit transactions are transmitted at least two days prior to the actual pay date. This allows the employer time to ensure the funds are in the account and gives the bank time to detect related issues. The provider should send the employer payroll registers detailing all payroll transactions when they send the checks/pay stubs to him each pay period.

Changing Payroll Services and Options

The payroll service should provide the employer with written documentation of its services and related costs. Services generally include complete payroll processing; all the employer has to do is fax or email the hours to be paid each pay period. Upon each pay date, the payroll company generally includes an invoice in the courier package containing the checks/stubs and payroll registers.

The employer needs to give the new provider power of attorney if he is requesting options such as tax processing. The payroll funding company must interact with the government on his behalf. Without power of attorney, it cannot make critical tax inquiries and payments related to his account.

Switch payroll service provider at the end of the quarter or year, if possible. Wage reporting and tax payments are often done on a quarterly basis, and W2s are processed yearly. Switching at the start of a new quarter or year helps to enable a smooth transition.
Tip for Changing Payroll Services and Options

If the employer is only changing his payroll options, the options and costs should be mutually agreed upon and documented.

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