(US) Switching providers - 5-step checklist

Any kind of change can feel overwhelming and switching payroll providers is no exception. Getting it wrong can also result in an administrative nightmare or worse — which is why you should follow these steps to cover all your bases as you make the switch. 

Best time to switch providers

Due to quarter-end and year-end reporting requirements, it is best to switch payroll providers at the beginning of every quarter. You will not need to provide as much information if you pick the right time. 

We recommend switching in the following months each year –

• January
• April
• July
• October

Step 1: Notify your current provider 

• Most companies require a 30-day notice. However, if you are using a SaaS solution (cloud-based or online), you might be able to cancel your subscription right away.
• Review your contract/subscription agreement and ensure that you provide the required amount of notice to your current provider. 

Step 2: Request a refund for FUTA contributions, if SUTA contributions, if switching mid-quarter. 

• FUTA is an annual, employer-only tax contribution. Typically, payroll companies withhold FUTA contributions on every payroll, so you'll need to request that the funds be returned to you so that you / new provider can submit the payment on your behalf.
• If you are switching in the middle of a quarter, you also need to request a refund for SUTA contributions collected to date. 

Step 3: Request copies of all Payroll Register reports up until your last payroll 

A payroll register report provides a comprehensive recap of each payroll, including a detailed breakdown of net wages, payroll taxes and more by employee. 

• If you’re switching providers mid-year or mid-quarter, you’ll need the information from these payroll register reports to setup your active and terminated employees with your new provider.
• The key component in the setup of a terminated employee or contractor is capturing the year-end and quarter-end data correctly. Without accurate information, your new provider will not be able to issue W2/1099s for your terminated staff during your year-end filing. 
• As an employer, you are required to keep payroll records for at least four years after filing the 4th quarter for the year. If the payroll records are maintained by your payroll provider, you will need to get access to all the payroll records before your relationship is terminated.
• Once your relationship has been terminated with your previous provider, you will have no control over the speed with which the information will be handed over, especially if you have an emergency. 

Step 4: Request Copies of Paystubs for All Staff, Including Terminated Employees and Contractors

• Your new provider isn’t going to have access to past paystubs, which is why you’ll need your current provider to give you electronic copies of all past paystubs, for active and terminated staff. 
• This will be especially handy if any of your employees need access to the last two paystubs and you are in the middle of a switch to a new provider.  
• If you're switching to Wagepoint mid-year or mid-quarter and you've paid terminated and active employees to date, we will require their final paystub before the current quarter as well as all of the paystubs issued within the current quarter to ensure correct quarterly and yearly filings moving forward. Learn more.

Step 5: Ensure That Your Prior Provider Does Not File Year-End Reports on Your Behalf 

Most payroll providers understand that the employer/new payroll company will be responsible for filing year-end reports once a switch-over has been completed. 

• Even though it seems obvious, it never hurts to put this instruction in writing because the one thing the IRS doesn’t appreciate is getting two sets of year-end reports from two separate providers.
• Submitting two separate year-end reports for a single company could trigger an audit and worst of all, create a lot of confusion for your employees and your business. 
• Note: if you switch mid-quarter, ensure that your prior provider does not file quarter-end reports for the current quarter. For e.g. your last payroll processed with the previous provider is for a pay date of May 30. You will process the next payroll with the new provider for a pay date of June 30. Your new provider will file quarterly reports for the current quarter. 

By following these steps, you’ll be able to navigate the administrative challenges of switching payroll providers in a more organized manner. Of course, there will also be the added bonus of starting a relationship with your new provider with a clean slate.