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4 Common Challenges With Mid-Year Payroll Conversions
It’s that time of year when companies who couldn’t switch payroll providers at the end of the year start thinking about making a change. Payroll is a complex process and there can be many questions and challenges when you’re looking to convert to a new payroll provider mid-year. According to the 2017 NGA Payroll Complexity Index, payroll complexity is impacted by key factors such as managing payroll and employee data, security, and control in an ever more complex tax and legal landscape.
Chances are, at least one of these factors impact your payroll processing and cause you to wonder if a mid-year payroll conversion is the right move. At APS, we have handled many successful mid-year payroll conversions, so we put together a list of the four most common challenges and what you can do to tackle them.
Challenge #1: Data Errors
You always want to make sure you give your new payroll provider a complete payroll history with any changes that occurred during their time with the previous provider. Consider this example: An employee moves from one state in which they weren’t paying state taxes to one they now are. Your payroll provider needs these details, especially if they’re also handling your payroll tax filings and payments. Giving your new provider a payroll summary report is the best way to provide a complete picture of your payroll history. If the history isn’t readily available in your previous provider’s system, you can request one from the provider directly.
Once your new provider has received your complete payroll and tax history, they should perform a payroll assessment. This includes the following:
Tax Catch Up
Your provider should input your history from your previous quarter and check to see if everything is correct and paid current. If there are any errors, your provider’s tax compliance team should help you correct them.
Once all of your data has been imported into your new system, parallel payrolls should be run prior to your first live payroll submission to ensure everything is processing correctly.
This process should review situations such as paying taxes in multiple states, non-scheduled payments, or if deductions are set up correctly (pre-tax versus post-tax). If any errors are found, your provider should discuss what your options are to determine the best way to handle fixing them.
Challenge #2: Multiple Pay Frequencies
It’s not uncommon for companies to pay employees at different frequencies (bi-weekly, weekly, monthly, etc). Whatever the case may be for your company, this shouldn’t be a huge hurdle to climb during a mid-year conversion. Make sure your provider has the flexibility to handle multiple pay frequencies. The payroll system should allow you to create different departments or pay groups and apply different frequencies as needed.
Challenge #3: Complex Payroll Processing
A lot of the apprehension around mid-year conversions stems from companies thinking their payroll processing is so complex there’s no way they can switch providers unless it’s at the beginning of the year. Perhaps you have several benefits deductions coming out each pay period. Or maybe you’re using a time tracking system that is separate from your payroll system. It sounds complicated, but with the right provider it doesn’t have to be.
Your provider’s payroll solution should not only manage multiple pay rates, but also integrate with any existing business investments you may have (retirement plans, general ledger packages, time tracking systems). Your provider should have the ability to pull data from all of these systems and ensure everything imports correctly into their solution.
Challenge #4: Complex Payroll Taxes
Perhaps you think your payroll taxes are so complicated, it’s just too hard to switch mid-year. But no matter how complex your payroll taxes are, leveraging help from tax experts is always a good decision. They’re experts for a reason and they can help you maintain compliance and manage your risks.
Your new payroll provider should have a staff of certified payroll tax experts who can help you handle federal, state, and local taxes. They should also assess your current payroll taxes to see if you have been potentially underpaying or overpaying in order to reduce your compliance risk and potential for fines and penalties.
Looking to make the switch to a new payroll provider?
Anytime is the right time to make a change to a new payroll provider. This handy Mid-Year Payroll Conversions Checklist provides the tools you need for a pain-free payroll conversion.
Mid-Year Payroll Conversion Tips
Here are a few mid-year payroll conversion tips from our tax experts. That way when you’re ready to switch payroll providers, you can do so with confidence:
Double Trouble: Check with your previous payroll provider or tax service to see if they have already paid your unemployment taxes. Chances are, they have and you don’t want your new provider to pay it again!
The Break Up: If your new payroll provider will also be handling your payroll taxes, make sure to cancel your previous tax service to eliminate duplication of filing and payments.
Playing Catch Up: Most payroll providers won’t file for previous quarters since this is the responsibility of your previous provider. But your new payroll provider should make sure your previous quarter data is correct.
If your new provider doesn’t utilize the processes mentioned above during your mid-year payroll conversion, they may not be the right fit for your company.
Overcoming Conversion Challenges
Payroll is a complex process and there can be a lot of potential challenges when you’re looking to convert to a new payroll provider mid-year. Whether its data errors or complex payroll taxes, partnering with the right provider can eliminate these challenges and the stress that comes with them. Choose an experienced and knowledgeable provider who will give you confidence in your decision to switch payroll providers.
How APS Can Help
APS has been providing superior payroll and tax compliance services for over 23 years. Our solutions experts are here to help with your year-end processing, including W-2s, 1099s, payroll taxes, and ACA reporting. While mid-year conversions are a great time to make a change, anytime is the right time to convert to a new and better payroll provider. No matter what time of year works best for you, APS will handle your year-end processing and tax filings for a pain-free payroll conversion.
For more information, please visit www.apspayroll.com or call 855-945-7921.
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