We’ve all been there: awkwardly texting an ex, asking if there’s a good time you can come by to pick up something that you left at their house or apartment (hint: there almost never is a good time). You arrive and, as anticipated, it’s extraordinarily awkward. Internally, you curse your past self for their inability to remember that hoodie or hairbrush or your Ninja 7-speed blender and food processor that their mother-in-law got you for Christmas one year that you never really thought you’d use but actually became a huge part of your daily routine. It’s a situation we can all relate to. The same can be said when leaving your current payroll or HR services provider. You may not realize until it’s too late that you forgot to request a certain form or get payroll data from a certain month from them, and then you’ll find yourself awkwardly reaching back out to try to receive said data. It’s not fun for anyone and can lead to unnecessary slowdowns when trying to get implemented with your new service provider.
At Payday HCM, we’re very familiar with the HCM service bureau conversion process. We’ll be honest: although we have industry-high client retention rates and we strive every day to achieve perfection, there are still just some situations where a different solution is just what’s best for our clients. We get it—ultimately, we want what's best for your business, even if that means finding a new provider with an HCM solution that’s a better fit for your business. This also means we’re familiar with the issues that can arise during the conversion process and what companies sometimes overlook when it comes to switching HCM service providers.
That’s why, in this article, we’ll be going over what things your business needs to consider when leaving an HCM service bureau. We’ll go over the kinds of questions your current service provider might ask you when it comes time for you to leave for a different provider, the information you’ll want to have ready at the start of the conversion process, as well as the importance of data migration in the conversion process. By the end of this article, you’ll be able to ditch the awkward interactions of conversions past and hit the ground running with your new provider.
In this article, you will learn:
- What Your Current Provider Will Need to Know
- What Do You Need For a Payroll Conversion?
- Data Migrations and Payroll Conversions
What Your Current Provider Will Need to Know
First, we’ll review the information your current provider will need when transitioning to a new payroll provider.
Communicate With Your Current Provider
One of the most important things to consider when leaving an HCM service provider, whether that be one where you just receive payroll services or outsource all your payroll and HR functions, is to communicate with your current provider about your intention to switch. Proper communication is key to ensuring a smooth conversion process.
The sooner you communicate with your provider about your intention to switch, the sooner both you and your provider can start working on getting the necessary information ready to execute the conversion. On top of that, it’s also possible that your current provider will be able to make changes that can help alleviate any issues that may be warranting you to switch providers.
Tax Filings, Unemployment and Workers’ Compensation Deposits
If you’re set on converting and you’ve found a new provider, you’ll want to work out certain details with both your new provider as well as your current one. Depending on the timing of your transition, you’ll want to coordinate with both providers as to who will be handling your tax filings and W-2 forms.
If transitioning in the middle of a quarter, you’ll also want to keep in mind that you will receive a refund for your federal unemployment tax (FUTA) as well as your state unemployment tax (SUI). You’ll also want to note when your workers’ compensation reporting begins and ends, and compile a report of any wages paid to your new provider to ensure accurate workers’ compensation reporting and filing.
What Do You Need For A Payroll Conversion?
Next, we’ll get into the things that you’ll need when you’re starting a payroll conversion, including important information to hand over to your new provider.
Information For Your New Payroll Provider
There are several things you’ll want to collect from your current payroll provider to hand over to your new provider, including:
- Business name, structure, address, and Employer Identification Number (EIN)
- Payroll records, including employee data, payroll returns, pay stubs, and register reports
- Contractor and terminated employee information
- Payroll tax deposit dates
- State unemployment tax identification number
- W-2 forms
- A voided check
Again, this is where timely and early communication becomes crucial to ensuring a timely conversion process. You’ll want to be as specific as possible when requesting information from your current provider to hand over to your new provider.
Timing Of Your Payroll Conversion
The timing of your payroll conversion will also affect what kinds of things you’ll need to keep in mind. There’s a common belief that payroll conversions should be done around January 1st to ensure a smooth conversion process, and while this idea is somewhat true, you can switch payroll providers at any time during the year.
If transitioning at the beginning of the year, there often won't be any special considerations in terms of what you need to hand over to your new provider. For those making the transition at mid-year or mid-quarter, your new provider will likely perform an audit and request year-to-date payroll information in order to reconcile taxes submitted to state and federal agencies.
Data Migrations and Payroll Conversions
Data migration is a big point of consideration for any company considering a payroll conversion at any time of the year.
Migrating Data Between Payroll Providers
In our digital age, sharing files between people or companies has never been easier. That being said, it’s also much easier to accumulate large amounts of data as this information isn’t taking up physical space. This can make the task of data migration during a payroll conversion a daunting one.
If you’ve been with your current provider for many years and are considering a switch, you should think about data migration early on in the process. Clear communication between your current provider and your new provider can help to ensure that the data migration process goes as smoothly as possible.
Planning for Data Migration
There are a few steps businesses can take to prepare for data migration when switching payroll providers. At the top of that list is creating a data migration plan, which should include things like a timeline, an overview of the data to be migrated, points of contact during the migration process, and procedures for handling possible disruptions or errors.
Before you begin any data transfer, be sure to check and clean any data ahead of migration. It can also be helpful if you’re able to run parallel payroll cycles to ensure your new system is running payroll as it should be. You’ll also want to ensure your new system meets any local or federal compliance requirements.
One HCM Service Provider After Another
Breakups are hard, especially when it’s your business and your HCM service provider. It can be difficult to finally make the switch after months or possibly years of working together, but sometimes, you just have to do what’s best for you (and your business). Of course, there’s no rulebook when it comes to these kinds of things, so for those who have never gone through a payroll conversion (or maybe even for those who have), you may not know what to do or what information to have ready. This can make the conversion process more difficult than it already is and lead to costly mistakes. Keeping in mind the considerations in this article, though, you’ll be able to breeze through the conversion process and get started with your new provider without any sort of baggage.
The payroll conversion process can feel like it might never end, but what happens once it’s finally complete? Making the transition between implementation and customer service, establishing a strong communication chain, and having a dedicated account team can all help to create a seamless transition from conversion to client. Learn more by reading our article on what happens after a payroll conversion to ensure your business is prepared for every step of the process, including what happens after.
Topics: