Is Switching Payroll Providers a Good or Bad idea.
It is that time of year when payroll providers actively market their products to business owners. If you have had pain issues with your current product this may seem like a good idea, but is it?
It depends. It can be a good idea if your payroll provider is not working out for your employees or for you. If your employees cannot easily access records or update information, or if you are unable to do what you need as an administrator, then maybe discuss making a change with your CPA or Office/Payroll Manager. If you all agree that another product can better provide what you need, good idea.
It is usually a bad idea to make a decision alone. You must discuss a change with your CPA or Office/Payroll Manager and run real-time demos. If there is no real demo option or they tell you they will get back to you when a functionality you want to see does not work, bad idea. This applies to new products from the same payroll provider.
The truth is that the nice person that sells you the new Payroll product is a salesperson. The salesperson is not the implementation team or the product itself. Even though they may say they are going to help walk you through everything, the implementation process can be brutal.
Here are things to consider:
On-boarding and Off-boarding Fees. These are fees to administratively transfer your account into the new provider and unfortunately from them. There also may be fees that your previous provider will charge for your ending your service with them. Fees are normal but maybe unknown to you. Some run promotions that waive fees or offset off-boarding fees. Ask them about these fees, then get it in writing.
Account Numbers: Before payroll can be processed you will need to provide Tax IDs and State, County and local withholding and unemployment account numbers. If these are not submitted, reports cannot be filed. If they are not accurate, the wrong reports will be filed. If the on-boarding team applies for a new number, the old account becomes delinquent. In all cases you may receive deficiency notices from various agencies. They will refer you to your CPA, who will charge you a larger hourly or set rate to reconcile and fix the issue.
Quarterly and Annual Reports: Who will file the next quarterly (941 and State equivalents) and year-end reports (944 or 940 and State equivalents). The new provider will usually assume this, but you must ensure it in writing. They will need all the current information. This means all filings from Jan 1st and payroll reports from the 1st day of quarter since last filing. When this fails, they will refer you to your CPA, who will charge you a larger hourly or set rate to reconcile and fix the issue. Expect a series of letters from the IRS or State agencies as they may not have a record or Power of Attorney for the CPA.
W-2s: Prepare your employees for the possibility of
more than one W-2. The previous provider may issue W-2s through the last check
run, but only if you choose that option during off-boarding. However, the new provider may be able to issue a full year’s W-2 but only if you provide them with the
information as of the first of the year. You will need to verify that each of your payroll companies is aware of how you
want the W-2s managed. On rare occasions when there are discrepancies,
they will refer you to your CPA, who will charge you a larger hourly or set
rate to reconcile and fix the issue. Note: Historical W-2s will be found on the
previous payroll provider's site.
The bottom line. All payroll providers are basically the same in price and quality. They are almost always a better option than a CPAs, Bookkeepers or Tax Professionals that run them manually. The bottom line is to never make this decision alone. To ensure a smooth transition, always discuss it with your CPA or Office/Payroll Manager.
