Payroll Service Changing Providers. Chapter Three. What should happen when I Change

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Transitioning Payroll Providers: What to Expect

Switching payroll outsourcing providers can be a smooth process if you know what to expect. This article, the final installment in our three-part series, outlines the key aspects to consider during the transition.

Key Considerations

- Timing
- Forms
- Procedures

Timing

Changing payroll service providers is typically easiest at the end of the calendar year. This timing ensures that all tax forms and deposits from January 1 onward are managed by the new provider, eliminating any confusion about responsibility. If a year-end switch isn't possible, consider changing at the end of a calendar quarter?"March 31, June 30, or September 30?"as the next best option. However, if necessary, you can switch providers at any time during the year.

The duration of the transition depends on the company's size and complexity. For a business with around 50 employees, the switch can typically be completed within two weeks, even with paperwork and paydays already scheduled. Multiple state operations may extend this timeline.

Forms

The new payroll service provider will supply a comprehensive set of forms, such as:

- Bank authorization forms
- Employee data forms
- Direct deposit authorization forms
- Company information sheets
- Tax deposit frequency details
- Earnings, deductions, benefits, accrual forms
- Payroll submission details
- Power of Attorney forms

These forms are crucial for tailoring the payroll system to meet your needs and ensuring timely creation of year-end documents like 940s and W2s.

Why Power of Attorney?

The new provider’s CPA requires Power of Attorney forms to communicate directly with the IRS and state authorities on your behalf. Without these forms, you would need to mediate between the government and your CPA. Direct communication helps resolve issues more efficiently.

Additionally, expect a privacy policy disclosure ensuring that your information remains confidential unless ordered by a competent court.

Procedures

After completing and submitting all necessary forms to the new provider, they should address any clarifications and provide additional forms if needed. Training will be provided to help you or your designated team integrate data for payroll processing. The provider should demonstrate how to enter payroll information and advise on steps to maintain accurate records, confirming first entry dates and paydays. They should also address any queries you or your staff may have.

Once the first payroll is processed, the provider should review outputs and reports with you to ensure clarity and address any concerns.

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