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May, 2020

4 Challenges With Mid-Year Payroll Conversions

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4 Challenges With Mid-Year Payroll Conversions

This time of year, many companies that haven’t been satisfied with their current payroll system start thinking about making a change. Payroll is a complex process and there can be many questions and challenges when looking to convert to a new payroll provider mid-year. According to a recent Deloitte survey, payroll complexity is impacted by key factors such as tax compliance, data accuracy, as well as process and technology integrations.

Chances are, at least one of these factors has impacted your payroll processing and caused you to question whether a mid-year payroll conversion is a good decision for your company. At APS, we have handled many successful mid-year payroll conversions, which is why we compiled a list of the 4 most common mid-year conversion 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 with the previous provider. Consider this example: An employee moves from one state where he or she wasn’t paying state taxes, to a state that collects taxes. 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 provides 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 can perform a payroll assessment.

How to Perform a Payroll Assessment

If your provider doesn’t normally perform a payroll assessment, we have listed the proper steps for them to follow:

Tax History

1. Tax Catch Up

Your provider can input your tax history from your previous quarter and check to see if everything is accurate and paid-to-date. If there are any errors, your provider’s tax compliance team can help you correct them.

Parallel Payroll Run

2. Parallel Payrolls

Once all your payroll data has been imported into your new system, parallel payrolls can be performed prior to your first live payroll submission to ensure everything is processing correctly.

Tax History Verification

3. History Verification

This process is used to review the accuracy of 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 can discuss what your options are to determine the best way to correct them.

Challenge #2: Multiple Pay Frequencies

It’s not uncommon for companies to pay employees at different frequencies. The most common pay frequencies are:

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Weekly

This payroll would be the most frequent as employees would receive wages each week.

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Bi-Weekly

This type of pay frequency occurs every other week on the same day each time such as a Friday, or a Monday.

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Semi-Monthly

This occurs twice a month on specific dates such as the 15th and the 30th. In February the pay date would need to move forward.

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Monthly

With this type of pay, payroll is processed once a month, to be paid out 12 times a year.

It’s important that your provider has the flexibility to handle multiple pay frequencies. Ask if their payroll solution allows you to create different departments or pay groups and apply different frequencies as needed.

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.

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 there are several benefits deductions for each pay period. Maybe a separate time tracking system is being used and it’s challenging to sync data to the payroll solution. It sounds complicated but with the right provider, it doesn’t have to be.

Ask if your provider’s payroll solution can manage multiple pay rates and integrate with any existing business investments you may have (e.g. retirement plans, general ledger packages, time tracking systems). It’s important that your provider can easily export data from the systems you use and import that information correctly into their solution.

Challenge #4: Complex Payroll Taxes

Payroll taxes can be very complicated, but that doesn’t make a mid-year payroll conversion impossible. No matter how complex your payroll taxes are, partnering with a provider that has a team of tax compliance experts is a sound decision for your business. They’re experts for a reason; and, they can help you maintain compliance and reduce your company’s risk.

When vetting payroll providers, make sure your new provider has a staff of certified payroll tax experts who can help you file federal, state, and local taxes. Verify that they will assess your current payroll taxes to see if you have been potentially underpaying or overpaying taxes. You’ll save money by reducing your potential for fines and penalties.

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:

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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!

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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.

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End On a High Note: If you’re planning to switch providers at the end of a quarter, be aware the payroll assessment period will be shorter. While this process is expedited to ensure your go-live date is met, your new provider can still prioritize your tax catch up and history verification depending on whether your taxes have already been paid.
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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 can make sure your previous quarter data is correct.

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.

End On a High Note: If you’re planning to switch providers at the end of a quarter, be aware the payroll assessment period will be shorter. While this process is expedited to ensure your go-live date is met, your new provider can still prioritize your tax catch up and history verification depending on whether your taxes have already been paid.

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 can 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.

Any Time is the Right Time to Switch

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. However, any time is the right time to switch to a new payroll provider. Knowing what challenges can arise and proactively asking your payroll vendor the right questions sets you up for a successful transition.

Whether it’s data errors or complex payroll taxes, partnering with the right provider can eliminate these challenges and the stress that comes with them. Understanding how to overcome potential hurdles paves the way for an easier and more efficient mid-year payroll conversion.

How APS Can Help

APS has been providing superior payroll and tax compliance services since 1996. 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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