Are you dissatisfied with your payroll provider, but worried about the complexities of switching to a new one? Many businesses believe the only time they can change payroll providers is by waiting until the end of the calendar year and running their first payroll in January. The truth is, the middle of the year can also be a great time to make a change and with the right partner, the process is far more manageable than you may think.
Below we debunk five common misconceptions regarding a mid‑year switch.
1. You cannot switch payroll providers part-way through the year.
You can change payroll providers at any time of the year. Some companies prefer to switch mid-year when team members are out of the office and the business is running at a slower summer pace. The right payroll provider will be able to guide you through the process smoothly and efficiently, with minimal disruption to your day-to-day operations.
2. Your payroll data could go missing or have errors.
Discovering data errors in your system is beyond frustrating, especially when you are fed up and ready to move to a new solution. It is essential to fix these errors, prior to bringing on the new provider. To make sure to avoid future data errors, have your provider perform an assessment of your payroll history. This ensures your data is free from error and that your new partner is equipped with accurate data. From there, they will be able to determine the next steps in your payroll conversion process.
3. You could lose all your payroll history.
If you’re switching payroll providers mid-year, all your payroll history for the current calendar year by employee can be brought into the new system. In addition, you can also bring in historical employment data from the past years.
It is important to note, as an employer, you are required to keep records that were used to calculate pay including hours worked, total wages per pay period, date of payment, payment basis and additions or reductions in wages. This information is required to be kept on record for at least three years to stay in compliance with the Fair Labor Standards Act. The IRS requires payroll records to be kept related to employment taxes for a least four years and some states have even longer requirements.
4. Complex payroll taxes can lead to potential heavy fines and penalties.
Your new provider can guide you through the process of migrating your tax history and help ensure your taxes are administered seamlessly going forward. Assessing your previous quarter’s taxes helps make sure your payments are correct and up-to-date.
At DM Payroll Solutions, we take on the back-office tasks of accurately calculating and depositing your payroll taxes, as well as remitting your tax filings on time so you can concentrate on running your business. We support you with automated processing, national compliance and effortless tax filing.
5. Employees will get two W-2s.
You will need to provide your new provider with year-to-date employee payments. This ensures your new provider has accurate pay information for the entire year, so they can create accurate tax filings for your workers. The historical information should include the name of all employees and the total amount paid in the current year starting January 1 until your go-live date with the new provider.
Ready for a Mid-Year Switch?
Consider the impact on your business if you decide to wait until the new year to make an adjustment. Are you experiencing payroll mistakes, seeing fees on your invoices or just not getting the customer support you need from your vendor? Having the right payroll system in place will make your business operate more smoothly while guaranteeing all workers are paid on time.
