Changing your payroll provider can seem like a daunting task...
The time it takes to research and choose a provider and then migrate means that it sometimes feels like there's no going back.
In this guide we'll take a look at the signs you might need to switch from your current software, the options out there to choose from and what the migration process might look like.
How to know if its time to switch provider
Here at Pento, we're always speaking to businesses looking for a new payroll solution. Here are some of the most common pains we tend to hear about...
Wasting time checking for inaccuracies and errors
Do you notice payroll errors drafts shared by your current provider? If you're spending too much time on unnecessary double checks, this is one of the first signs it might be time to look for a new solution.
Your business is outgrowing your current payroll process
If your business is scaling, you may need to switch to a provider that can scale with you. As your headcount grows and your payroll becomes more complex, your provider might not be robust enough to adapt.
Running payroll just takes too long
If you're finding yourself spending more time passing information back and forth with your provider as well as repetitive manual tasks like making payments, distributing payslips and posting journal entries... then this is probably a sign that its time to change.
You need more support
For most businesses, there will come a point when their payroll is getting too complex to manage themselves or they just need some support on niche issues. Different solutions will have different levels of support - and some of them might even involve additional costs to get premium support from genuine payroll experts.
You don't have enough data/insights
Need more control and visibility over your process? If you're lacking in insights, you'll want to move to a solution that comes with automatic reporting or even work with an outsourced service provider that will generate specific reports for you.
The three most common types of payroll services
Modern payroll software providers
What are they?
Modern cloud-based systems automate most manual tasks and generally gives you more control over your process than most other types of solution (this is the category that Pento falls into).
Things you should now
Although Pento combines automation with support from CIPP experts, not all modern solutions have the same level of assistance. So if this is a priority you may want to double check this.
What are they?
Outsources bureaus will take on most admin tasks for you as well as the burden of compliance. You’ll be acting as the intermediary between your provider and your employees.
Things you should now
Once you grow past 50 or so employees you might find this kind of service just isn't scalable. You'll still need to send documents back and forth and check for errors.
What are they?
Managed services are fairly similar to traditional outsourcing, the key difference being that you’ll be provided with a user interface to upload and download files.
Things you should now
Although you'll have an interface to use - the core functionality is essentially the same as outsourcing to a bureau. These interfaces don’t actually do too much, they're a bit like a shared Google Drive.
At Pento, we also offer an (optional) managed service. Our service differs from other solutions out there in that you'll stay in control of your payroll while getting extensive support and advice from a team of experts. You'll get access to modern automation software and all the benefits you’d expect from a managed service so there's no trade-off.
Legacy Enterprise Resource Planning
What are they?
Legacy ERPs are the old, well-known payroll systems. They function like a cross between software and services.
Things you should now
These outdates platforms are usually pretty rigid, clunky and lack integrations with newer software. if you're a big company with simple requirements and no plans to grow, then legacy ERPs might be viable... but in any other case you'll probably find they aren't flexible or scalable enough.
How to switch payroll providers: this is what the process looks like
Step 1: Define what you're looking for and start researching
Start by understanding your business's payroll requirements. You'll probably want to quickly take stock of what you’re looking to achieve and the pains you're looking to solve.
The three most common criteria we tend to see are:
- Confidence: Reducing human errors, guaranteeing compliance and making sure people get paid on time.
- Time saving: Avoiding outdated payroll software solutions and clunky interfaces and cutting time wasted on unnecessary manual tasks like exchanging PDFs/spreadsheets and correcting errors.
- Support: Being able to talk to an expert whether it's just a quick question about an employee’s pay or helping to fix major compliance issues.
Step 2: Be sure to ask the right questions
When shopping around for your new payroll supplier, here are some of the questions we'd recommend asking:
- Are there any hidden costs?
- What does your support look like? What hours are they available? What's the average waiting time?
- What does your reporting look like?
- What HR/accounting software do you integrate with?
- What does the transition/onboarding process look like?
Step 3: Once you've made a decision, notify your current payroll provider
This step is a fairly obvious one but worth quickly glossing over...
You'll need to let your current provider the effective termination date, reasons for switching and any specific requirements for the transition process.
You may also need their help with the data migration process. Just let them know how and when the data will need to be transferred to the new provider.
Step 4: Collect employee details and set transition date
Start by creating a comprehensive inventory of all employee data that your new payroll provider will need (personal details, employment contracts, salary information, tax details etc).
Once you've got this from your current provider, be sure to review this data to make sure its accurate and up-to-date.
Then you can work with your new provider to decide on plan for transferring employee data - which fields are required? What format do you need to have your data in? Are there any extra documents needed?
When it comes deciding on your transfer date, a lot of businesses choose to wait until the end of the tax year... but there's nothing stopping you switching before then (we'll cover this in more depth later 👇).
Step 5: Transferring historical payroll data
Migrating your data to a new payroll vendor doesn't need to be too difficult. here's what the process tends to look like:
- Extract data from your previous provider
- Make sure its accurate and in the right format
- Use encryption and secure file transfer methods
- Work with your new payroll provider to map the data fields from your old system to the new system.
- Before the official transition date, be sure to test data fields, calculations etc
- After the data transfer, validate the historical data in the new system to ensure it matches your records and is accurate.
- If the transition occurs during the fiscal year, don't forget any data needed for a smooth year-end transition.
Step 6: Integrate with your current systems
If your new provider does have out-of-the-box integrations, you'll just need to determine the specific integration points where data needs to flow between your payroll provider and other systems (employee data, time and attendance records, financial data etc).
if not, then you'll want to work with your provider to get them custom-built. Again, you'll want to test any integrations before the official switch over.
Step 7: Test your new solution via a parallel payroll run
A parallel payroll run just means run a new payroll system alongside your existing system to ensure that the new system is functioning correctly and producing accurate results before fully transitioning.
You choose a subset of your employees to use for the parallel run. This group should ideally represent a range of scenarios, like full-time, part-time, and different pay structures.
Then, you just process payroll for the selected test group in both the new and old systems for a specific period (e.g., a single payroll cycle).
If you use identical data inputs for both systems, you'll be able to see any discrepancies between the two systems - in things like calculations, salaries, taxes or deductions.
What's the best time to switch payroll providers? Do you need to wait until April?
There is no standardised 'best' time to switch providers.
This will depend entirely on your own needs and circumstances. Your end goal should simply be a smooth transition with minimal disruption to your everyday business operations.
For many businesses, this means waiting until the end of the tax year, so that the year-end process is cleaner.
However, there are plenty of cases in which switching payroll providers mid-year might make more sense.
Here are a few considerations to think about...
End of the tax tear
This is generally the most popular time to switch payroll solutions.
Managing tax reporting and compliance will be easier and you'll also minimise disruption to employees' tax records.
End of a payroll period
If you operate on a specific payroll period, it may be more convenient to switch at the end of a pay period to avoid the complexities of transitioning in the middle of a pay cycle.
End of your current contract
If your current contract is coming to an end and you don't want to be left without a provider, you may need to switch before the end of the tax year.
Some businesses naturally experience slower periods or downtime during certain times of the year.
If you anticipate lower payroll processing demands, it might be an ideal time to switch without causing significant disruptions.
Compliance and regulatory changes
Are there any major upcoming changes in payroll-related regulations on the horizon? If significant regulatory changes looming, you may want to switch software mid-year rather than waiting round until April.
Here's Pento makes running payroll in the UK faster and error-free 🇬🇧
Pento was purpose-built to make payroll smooth and complaint - combining modern automation with best-in-class support.
Here's why UK businesses are choosing our payroll software solution:
- Automate any payroll workflow and cut time spent on payroll by 80%
- Edit pay until payday - No deadlines. No hidden costs
- Manage even the most complex process - we support any worker type/ working pattern and payment frequency
- Easily integrate with your current systems to avoid duplicate records and manual legwork
- Get support from CIPP experts for a seamless transition
Take the stress out of migration
Want to get up and running before your next pay day? Our Onboarding Team will do the migration admin for you - collecting data from your previous provider and reconciling it so you’re ready to run payroll with Pento before your next pay run.
Our payroll experts understand the intricacies of different systems. They’ll ensure all your data is accurately ported over to Pento and preserve the integrity of your payroll information.
Below you can see exactly how you'd run payroll using Pento in just 4 minutes👇