Changing Payroll Providers: A Checklist for Breaking Up and Moving On

Maybe you haven’t been getting along for a while. Perhaps the cracks have just started to show. Or, it might just be time for an upgrade. 

No matter the reason, changing payroll providers is never an easy undertaking. But, chances are, if you’re reading this post, you’re leaning towards breaking up with your current solution to find a better one. And that could be just the thing you need to win back lost trust with your staff or cut down on those relentless hours of admin.

There are lots of things to consider when switching payroll providers, particularly if you’re doing it mid-year. So, let’s review some guidance that can help, including a fun checklist for breaking up with your current provider and moving on to a new one.

Why change your payroll provider? 

As we’ve already alluded to, there are a number of reasons why you might want to switch payroll software providers. You may even be running payroll manually or completely outsourcing your payroll to your accountant or a payroll bureau. In that case, you might want to consider bringing your payroll in-house.

Regardless of your current payroll setup, you might not be getting your needs met for several reasons:

• Your business is growing, and your current accountant can’t keep up

• If you’re using software, it’s clunky and non-intuitive 

• You’re experiencing poor levels of customer service and slow response times

• You’re simply after better value for money (payroll outsourcing, for instance, can get quite costly with all those extra charges)

When is the best time to switch payroll providers?

There really is no ‘best time’ to switch your payroll system. This will really depend on your company and its unique needs. That being said, many companies will try to time their switch with the end of the tax year here in the UK. If you’re looking to switch in time for April 5th/6th, then that can be a real time-saver - you might not need to transfer as much data as you’ll be into a brand new financial year.   

On the flip side, since lots of companies will be switching at this time, your new provider might be busier than usual. So it could make sense to pick a quieter time of the year.

Can you change payroll providers mid-year in the UK?

Why, yes, absolutely! In fact, changing payroll providers mid-year might make more sense for your business, especially if you have a lot of data to transfer or need additional support with onboarding. So you shouldn’t be deterred. As long as you pace yourself and have a clear process to follow, there’s no reason you can’t have just as smooth of a transition in the middle of the tax year.   

How long does switching payroll companies take? 

While there’s no set time period for changing payroll providers, there are certain things you may wish to consider before switching that can help you ‘scope’ out the time that might be involved.

As is often the case with these sorts of things, if you’re organised and diligent in your record-keeping, the transition should be pretty straightforward and shouldn’t take more than a few weeks.

How to switch payroll companies in the UK - a checklist for breaking up and moving on

Sensing it’s the right time to move one? Then there’s a few things you’ll want to do to get the transition right. As with lots of things in life, having a checklist always comes in handy - here’s one covering the major steps you’ll want to take from breaking up with your provider to moving on. 

Take stock of your current payroll system 

Ask yourself honestly: what’s going well? What’s not working anymore? Just like in any relationship, it’s important to know what, why and where things need to change. Take stock of your current payroll setup. Identify any deal-breakers or missing features you'd love to have. Then, check the fine print for any break-up fees or terms that might affect your decision on when to call it quits.

Get the support you need

Remember, you don’t have to go it alone. In fact, it’s important to get your teammates and company leadership bought in right off the bat. Before you even think of looking at a potential new solution, get the group chat…err, we mean your stakeholders involved! Discover what’s important to them in a new solution.

Find that perfect match 

Don’t settle for less! Look for a platform that not only meets your current needs but also has the potential to grow with you. Consider what matters most—be it cost, functionality, or the extra perks. Your ideal system should have the scope to accommodate future growth. Consider the overall functionality, cost, and advantages it could provide. Figure out what your ‘type’ is on paper by exploring these factors when choosing a new payroll provider. 

Play the software field 

It’s important to know your options. In other words, you’ve got to ‘play the field’, so comparison shop to see what’s out there. Stack up potential solutions against each other. You want to check their compatibility with your business. 

If you’ve not already done so at this stage, it’s a good idea to book demos with the different providers you’re considering. Remember, it's okay to flirt with different options before you commit! Feel free to put the demonstrator through their paces - ask all the questions you need and get them to show you specific parts of the platform you’re likely to use the most. 

Make your choice!

Of course, you should take all the time you need. But once you’ve had time to sit through a few demos and discuss with your team, you’ll hopefully feel ready to make the right choice! But there are a few things to do before popping the question…

Break the news gently 

When the time comes, let your old provider down easy, ideally right after a payroll cycle, to avoid any awkward encounters. Make sure to handle all the formalities like final reports and ensure your employees' year-end documents are squared away.

Settle Into Your New Relationship

Now that you’ve made the switch, get comfy with your new setup. Input all the necessary details and follow the setup instructions closely to ensure a smooth transition. Don’t forget to announce your new software to your team with as much transparency as possible to avoid any confusion or surprises.

As you can see, switching payroll providers doesn’t have to be a hassle. With the right approach, it can be a refreshing start that brings new efficiencies and improvements to your payroll processes. 

But just in case you need more guidance, here are a few questions you can ask…

Questions to ask when changing payroll providers

Should I conduct a parallel payroll run? 

When changing payroll providers, make sure you do a parallel pay run. This is essentially a way to test out your new system against your old one. In addition to providing peace of mind (that you haven’t missed anything or lost any data), it’s a great way to build confidence around your new system. 

What will happen with all my data? 

When you move to a new software provider, particularly during the middle of a tax year, you’ll need to make sure your data is up to date. This means ensuring that the individual payroll identifiers for each of your employees match the information HMRC holds. 

Usually, a company will provide each of their employees with their own payroll ID number. This identifier is provided by either the payroll administrator or the payroll software that you are using. However, there is often an extra element that can complicate proceedings — particularly when transitioning from one payroll provider to another.

What about legislation changes?

Payroll is a complex subject. With different tax brackets, contract types, P11Ds, P60s and numerous other elements, it’s fair to say that the payroll administrator’s job is one few are hankering for. When it comes to payroll, legislation is introduced and changed regularly. Staying on top of it is a job in itself! 

The good news is that most (good!) payroll providers can help keep up with all these legislation changes. Many are also able to assist with complex calculations like holiday and sick pay. 

Changing payroll providers: Common mistakes to avoid

Keep Everyone in the Loop

Before you dive into a new payroll system, make sure everyone who needs to know is on board. This includes your team members, management, and especially your accountant. Getting everyone's approval early can prevent a scenario where you might need to backtrack to a less suitable system due to unexpected objections.

Time It Just Right

Timing is everything when it comes to switching payroll providers. To avoid a clash with your payroll cycle, plan the switch immediately after a payment period. This strategic timing ensures there's ample buffer before the next payday, keeping your payroll processing smooth and stress-free.

Understand the Full Cost

Pricing in the payroll world can be tricky and full of surprises—like hidden fees or discounts you weren’t aware of. To avoid being caught off guard, thoroughly understand all the costs involved in your new payroll system. This includes any one-off charges for setting things up or specific discounts that might apply to your business size.

Choose HMRC-Compliant Software

Ensuring your new payroll software complies with HMRC regulations is not just a good practice—it’s essential. Verify that the software you’re considering meets all current requirements for payroll processing. This not only simplifies your tax obligations but also helps you avoid potential legal headaches.

Switching your payroll provider is a significant move that can lead to better efficiency and compliance, but only if done correctly. Avoid these common mistakes, and you’re more likely to have a smooth transition to a system that fits your business needs perfectly.

Some final thoughts 

So there you have it - some common questions about changing payroll providers answered, as well as a handy checklist to help you break up with your current provider and move on with a new one. We talked about the best times to switch payroll providers, how to go about it and also common mistakes you can avoid.   

And if you’re interested in finding out more about PayFit, why not book a demo? We won’t just show you our platform; we’ll help you explore and weigh up your options so you can determine the best solution for your needs.

Happy switching!