The essential guide to switching payroll systems

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 Outdated technology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.