The essential guide to switching payroll systems


Aug 28, 2023

While switching payroll systems can be a major headache for most companies, there are often good reasons to bite the bullet and make the change. For example, it’s important to choose a payroll provider that can grow with you and has the full set of functionalities that you not only need now but as you expand. As your business evolves, an excellent payroll provider can keep up with your changing needs and help drive your success.

Rippling is a great choice because of its comprehensive HR suite that includes recruiting, headcount planning, time & attendance, and more—so you can run payroll in the same system you rely on for other HR management tasks. This straightforward guide will walk you through the ins and outs of switching payroll systems.

6 reasons for switching payroll providers

How do you know when it’s time to switch payroll vendors? Here are six indicators to look out for:

1. Your company has outgrown your solution

You may be hiring more employees, opening new locations, or dealing with complex compensation structures. Needless to say, as your business grows, new needs emerge and your payroll requirements will naturally evolve. If your payroll system can’t adapt, then you should find one that is suited to your needs. A new payroll provider can give you access to scalable solutions that can accommodate your growing workforce—now and in the future. 

2. Outdated technology

Payroll processes have advanced, and there’s exciting new technology and software that you’ll want to take advantage of. Has your solution caught up? If not, switching providers might offer access to more sophisticated features, such as automated payroll processing, employee self-service portals, real-time reporting, and integrations with other HR and accounting systems. These capabilities can streamline operations and enhance the overall efficiency of your business.

Your payroll software should also reflect advances in data security. Your vendor should use encryption, secure data storage, and regular audits to safeguard your sensitive employee information. If it doesn't, switch to a new system.

3. Product errors or deficiencies

Mistakes happen, but sometimes a payroll provider is simply inadequate. Common errors include mistakes on tax forms, failing to update tax rates, tracking employee hours incorrectly, errors calculating overtime, payroll discrepancies, and data duplications. This is a huge time-suck and can be harmful to your employees, not to mention you could be liable for tax penalties if the mistake isn’t caught and corrected in time. 

But, more than that, your reputation is on the line if payroll is processed incorrectly. The stakes are too high to work with an inadequate payroll system. You’ll want to use payroll software that has all of the features your company needs (such as multi-jurisdictional support)—if your payroll provider is lacking, it’s time to switch.

4. Integrations

Seamless integrations between different systems (e.g. Netsuite and Greenhouse) are essential for efficient payroll management. If your current provider doesn't integrate with your existing HR, accounting, or non-wage systems (such as time-tracking systems or retirement plans), switch to a provider that does to avoid the hidden costs of having multiple systems. This will streamline your processes, reduce manual data entry, minimize errors, and save time.

5. Customer service

Having a hard time getting ahold of someone at your payroll provider’s customer service department? Or is your vendor’s customer service lacking in professionalism? This can be a big sticking point—nobody wants to deal with time-consuming, frustrating customer service. A new provider may offer more responsive customer service or a dedicated support team. You may also want a vendor that offers a self-service portal, so you and your team can get answers to your simpler payroll questions quickly—after all, employees need to get paid correctly and on time.

6. Cost

Has your payroll provider ever charged you unexpected fees? Or maybe you have found a vendor that offers better savings, without sacrificing services? Switching payroll providers can lead to cost savings by offering more competitive pricing, eliminating hidden fees, or providing services that better cater to the specific needs of your business. Because Rippling provides a number of services natively, it’s typically cheaper to purchase, saving you the cost of choosing a variety of point solutions. In other cases, your budget will have simply decreased or increased, and you need a payroll provider within your new range or are ready to expand to a more all-encompassing vendor. 

When is the best time to switch payroll companies?

You can switch payroll solutions at any time during the year—but complications may arise if you don’t time it out well. The two best options are:

  • Timing out the switch so that you start with your new payroll provider at the beginning of a quarter. 
  • Timing out the switch so that you kick off the new calendar year with your new vendor. This is the best and least complicated option.

If you transfer to a new payroll system at the end of the year, which means you’ll be starting to run payroll with them at the beginning of the new year, you won’t need to enter employee wages from the previous year, which is known as “historical payroll data.” This saves a ton of time and makes your financial records easier to follow. Because you’ll be starting payroll with the new vendor on January 1, that service will have everything you need to file both your quarterly and year-end tax forms. 

Switching systems between quarters mid-year means that you’ll have to transfer historical employee data, but it’s still simpler than mixing and matching vendors over a single quarter. If you have used two different payroll vendors over a single tax quarter, then it becomes messy from a tax perspective—your accountant will have to put in more effort to pull data, transfer records, and file taxes. 

Whenever you decide to time the switch, check the terms of your current contract to ensure there are no cancellation fees or notice periods. Notify your payroll vendor early about your decision to switch systems, and give yourself plenty of time. More on that below.

How to choose the right payroll service 

Look for a modern payroll system with the integrations and automations your business needs. Read our full guide to see our tips for switching to a better payroll system. Here are some aspects to consider:

  • Does the system make automatic updates to payroll when there are employee changes?
  • Does the vendor offer excellent customer service?
  • Is the payroll software compatible with your current systems, and does it offer the integrations you need?
  • Does the system proactively surface discrepancies or errors in pay runs?
  • Can the system build a variety of reports, including custom reports such as new-hire reporting?
  • If you need help with paperwork, does the system automate quarterly and annual tax returns, W-2 preparation/filing/distribution, tax remittance, and complex tax filings for multi-state workers?
  • Can the system track and analyze labor costs using job codes?
  • Does the system integrate with your general ledger (GL)?
  • How does the vendor ensure that their payroll system is secure?

Looking for a seamless global payroll software solution? With Rippling's payroll system, you can:

  • Have employees submit expenses directly
  • Pay hourly workers
  • Manage all currency conversions, including payroll adjustments
  • Manage time & attendance natively
  • Process off-cycle pay runs
  • Automatically calculate prorated pay runs for new employees
  • Process payroll in <5 days
  • Automatically calculate overtime for every country
  • Make changes after submitting payroll

Rippling's payroll system offers 500+ integrations, automatic and accurate tax filing, and a dedicated mobile app where your employees can view their W-2s, pay stubs, and more. Rippling even has a 100% error-free guarantee on every pay run.

How to make changing payroll providers seamless

So you’ve selected a new payroll provider and are ready to make the switch. Congratulations! Here’s how to make the leap.

Step 1: Plan in advance

Adhere to any notice periods from your previous payroll systems, and give enough time for migration and implementation. Choose a start date with your new payroll provider; they should be able to guide you on how much time the transition will take.

Notify your old payroll provider that you’ll be terminating the service. It may be uncomfortable to tell them that you’re switching to a new provider—however, doing so is necessary. You may need them to help migrate data and, if you lie by telling them that you’re no longer running payroll, some vendors may inform the IRS that you’ve closed your business.

Step 2: Gather information for your new payroll vendor

Your new payroll provider should provide you with a full list of the information they need. They may ask for:

  • Company information, including your business name, business structure, and Employer Identification Number (EIN).
  • Payroll information and pay stubs/payroll journal for all current employees, contractors, and terminated employees. 
  • Payroll tax returns, tax deposit dates, and amounts.
  • State and local tax authority registration information, such as payroll tax account numbers.
  • A voided company check for your payroll or tax account.
  • Employee information, including their name, address, social security number (SSN), address, earnings, W-2s, withholding elections, deductions, and direct deposit details.

Note that, if you’re transferring mid-year, you’ll need to provide payroll tax returns, copies of quarterly reports, and copies of quarterly tax returns for the current year.

It may take anywhere from a few days to a few weeks for your new payroll provider to enter this information and set up your payroll, so make sure you set aside ample time. Your vendor will be able to advise how long it will take.

Step 3: Migrate your data

Set up your new account with your payroll vendor of choice. You may have to manually upload all of your payroll and employee data, but many services offer to do this on your behalf. 

Step 4: Notify your employees about the change

Once your new accounts are open, but several weeks before payroll begins with the new provider, let your employees know about the change. The switch to a new payroll provider should be relatively seamless for your employees. However, because they’ll lose access to information from the previous vendor, notify them that they may want to save past pay stub information while they’re still able to log on to the previous system. They will also want to make sure that their compensation and pay stubs are correct after the transfer to the new vendor. Give them details on what to look for.

Step 5: Close your accounts with your previous provider

After your new payroll service has confirmed that all of the data has been transferred and nothing else is needed from the old system, close out your old accounts and cancel any authorizations. If you’re switching providers mid-year, then figure out which vendor will issue W-2 forms at the end of the year. There’s a chance you may need to keep your old account open during that time but, more than that, you can only have one provider issue the W-2s. Duplicating W-2 filings at the end of the year can result in IRS notices and the need to amend W-2s. 

Step 6: Run payroll

The hard work of switching is (hopefully) done! Before your first payroll run, double-check that everything has migrated correctly. This will save you time and avoid payroll errors. 

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.

last edited: August 28, 2023

The Author

The Rippling Team

Global HR, IT, and Finance know-how directly from the Rippling team.