How to switch payroll providers: everything you need to know

how to switch payroll providers

If you have been wondering how to switch payroll providers, then you have come to the right place ! In this blog we explain everything you need to know about how to switch payroll providers and make it easy for you to understand and know what you need to do.

Paying your employees may currently be a time-intensive process for your business. So it may be time to start thinking about how to switch payroll providers. In this blog, we are going to talk about switching your payroll provider including when the best time to switch is, what to consider when switching providers and explain exactly how to make that switch seamlessly.

Why would I change payroll providers ?

This is a legitimate question. The right payroll provider (or software) can help you automate certain tasks, ensure compliance with HMRC, simplify tax filings and streamline the payment and reporting processes.

That said, as your business grows, your payroll software needs may change. If that’s the case, you may want to switch payroll providers in order to pay employees more efficiently and effectively, as well as save time and money on running payroll.

When is the best time to switch payroll providers ?

If you’re thinking about changing your payroll provider and/ or software, we always recommend doing this at the start of a tax year if possible, for a couple of reasons:

  • You won’t have to carry over any historical data from the previous tax year. The UK government makes yearly changes to tax thresholds, rates and codes. Switching with the new tax year makes it straightforward to implement these changes and reduces the chance of incorrectly inputting historic tax information.
  • No duplication of records at HMRC. With mid-year transfers on non-compatible software, HMRC can sometimes pick up the new providers reports as completely new employment records and therefore cause duplication of employment records for employees. This is both damaging to the employee, as their tax codes will be affected, as well as the employer as they will have to untangle the mess and may have to pay double in the switchover period to avoid any penalties.

What do I need to do when switching payroll providers ?

If you do find that you need to switch mid-year, you need to proceed with care and attention. You will need to decide what your existing provider will take care of until a specific date and what your new provider will manage thereafter. Detailed timelines are key, because of the following reasons:

  1. You don’t want this transition to affect your employees getting paid on time
  2. You don’t want provider overlap wherein they produce duplicate filings
  3. You don’t want to end up paying two providers at once

You should also double check the terms of your contract with your current provider. They may have cancellation fees associated with switching mid-year, so understanding the costs may influence your decision.

Finally, you should consider what your new payroll provider will help you with. Some providers offer to manage the transition for you, where others will not do that. Assess if taking on this workload mid-year will affect your productivity and workflows and if it is worth the risk.

Some things to consider

Before you decide to make the change, it is important to understand what isn’t working with your current payroll provider and how a new one can solve that problem. Follow these steps to uncover existing pain points and future opportunities with a new provider:

  • Audit what isn’t working with your existing provider (or software): The most important part of switching from one system to another is to identify what is not working so that you know exactly what you need your new system to do better.
  • List your new must-have features: Besides what isn’t working with your current system, write down your must-haves with a new system to ensure nothing gets overlooked.
  • Consider ease of use: How long will it take to get up and running with this new provider or software? Will the transition take a few days, weeks, or even months? Nail down your timeline and even plot it out on a calendar to ensure you don’t miss any deadlines.
  • Check out their customer service reputation: Ideally, your payroll provider will be readily available to help you with any of your needs. This is especially true in the case of needing help in an emergency or helping you figure out a sticking point close to a payroll submission deadline. Check out their reputation online by reading reviews from existing customers to get a feeling of what your potential new provider is like.
  • Consider integrations with accounting software: Integrations with accounting software mean one less step for getting key information into your payroll software or to your payroll provider. This goes along with the ease-of-use point above and is something that can save you a lot of time and money.
  • Make sure it’s HMRC compliant: Of course, if your payroll provider is not HMRC compliant, you won’t be able to accurately report to HMRC. To ease this burden, HMRC has an entire page dedicated to helping you find HMRC-recognised software, both free and paid, if you don’t already have one.
  • Analyse the costs: Not all payroll providers or software are created equal, and some have hidden fees and costs that you’ll need to consider. Make sure to heavily vet all potential costs before making a final decision.
  • Ensure cross-compatibility: As we mentioned above, cross-compatibility will make the transition much easier, faster and reduce the chances of human error.

How to switch payroll providers to ensure a flawless transition

Now that you know exactly what you are looking for in a new payroll provider, and have picked the right one for your business, it’s time to make the switch. Here’s a step-by-step checklist to help ensure a smooth transition.

Step 1: Clarify your new provider’s responsibilities

HMRC makes it clear that you are legally responsible for keeping detailed records of your employees’ details. That said, a payroll provider can keep and manage these records on your behalf. This includes providing payslips and making payments to HMRC for you (which are key parts of the PAYE tasks that make up payroll).

Would you prefer to track smaller things like employee leave and sickness absences, while tasking your payroll provider to focus on tax code notices, taxable expenses and benefits? Or, do you want your payroll provider to be in charge of every single factor related to payroll?

Once you know what your preference is, talk to your new payroll provider and make sure to clarify who will be responsible for what. This will reduce miscommunication and ensure a more seamless transition and operation.

Step 2: Check your existing provider’s cancellation terms

Just as you need to organise your onboarding process with your new payroll process, you also need to come up with a smooth off-boarding strategy. If you have a contract that lasts a year and you are eight months through, you may need to wait until the end of the contract to officially terminate your service. If you use payroll software, you will likely be able to cancel your subscription with greater flexibility.

Once you’re clear of any restrictions, contact your current provider, notify them that you are cancelling and ask what steps you need to take to begin the switch. Different providers will have varying requirements regarding their cancellation notices, so be sure to leave plenty of time just in case.

Step 3: Get your data in order for your new provider

Reach out to your new payroll provider and ask them what they need from you to get started. Again, do this far in advance, as you’ll want to have a buffer in case certain tasks or paperwork take longer than expected to complete. Here is a list of what your new payroll provider may need from you:

  1. Your business information. This includes your employer PAYE reference number, business structure, number of employees, and any other business information they request from you.
  2. Your employees’ details. Including their national insurance numbers, national insurance categories, tax codes, start dates, student loan amounts outstanding (if applicable), normal weekly hours worked, payment frequency (monthly, biweekly, weekly, etc.)
  3. Payroll records. This will likely include a record of all salary and wages payments, all deductions made, all staff leave and absences, copies of all PAYE coding notices (P9T) which have been received, every expense or benefit in kind provided and details of any contribution made by the employee.


Step 4: Start the migration process

Talk to your new payroll provider to see exactly what you need to do in order to begin moving your information over. You should also ask them what transition services they provide, as many providers will offer to handle all the data entry and migration admin on your behalf.

Step 5: Down tools with your old provider

Send a final message to your current provider to remind them that you are cancelling and moving to a new provider. Now is a great time to double-check that you have in fact completed your to-do list in terms of shutting down your service in the right way, at the right time and that you have notified the right people.

Step 6: Notify your employees about the switch

Keeping your employees in the loop will help you to get ahead of any confusion or potential misunderstandings. For example, the payslips may look different from one provider to the next, which could cause concern if they didn’t know to expect this change. Stay ahead of any potential scenarios like this by being open and transparent from the start. By following the steps laid out in this guide, switching payroll providers can be easier and by choosing to switch to LAS Accounting Ltd, you can rest assured that your payroll transition will be a smooth process and your future payroll runs will be in safe hands.

How can LAS Accounting Ltd help you ?

When it comes to navigating complex accounting areas such as payroll, you may find you want professional help.

Now might be the ideal time to find out more about LAS Accounting Ltd Payroll Bureau Service.

Don’t hesitate to get in touch for any further enquiries at:

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