How to Switch Your Payroll Provider in 8 Steps

Switching payroll providers is a significant undertaking for any team, but it’s often a necessary step to achieve greater efficiency, accuracy, and support for your growing business.

Many companies face challenges like frequent payroll errors, poor customer service, or systems that fail to integrate with critical HR tools.

At Deel, we understand the unique complexities of payroll transitions, from compliance risks to employee onboarding hurdles, and we leverage our experience supporting over 35,000 businesses worldwide to help you make the switch with confidence.

In this guide, we’ll break down the process into eight simple steps, guiding you from initial needs assessment to seamless implementation with minimal downtime.

By following our expert tips, you’ll unlock a more reliable, scalable payroll solution that not only reduces risks but also saves your team valuable time and resources. Let’s get you closer to a more efficient payroll process—one smooth transition at a time.

8 steps to changing payroll providers

What does the process of switching payroll providers look like? While your experience will depend on your company size, needs, and the complexity of the project, here’s a general overview of what you can expect:

1. Initial setup and discovery

Step one in switching payroll providers is to identify your needs. Understanding the current payroll process, challenges, and requirements is essential. Assess the need for a new payroll system based on pain points like compliance management and onboarding processes. For instance, frequent payroll errors can be significantly reduced by switching to an automated system like Deel.

During this phase, it is important to ask questions about the current payroll provider, compliance management, and onboarding processes. Questions might include:

• What challenges are you facing with your current provider?
• How is compliance managed?
• What is your onboarding process for new employees?
• What are your current contract requirements with your provider? Are there any cancellation fees?

2. How to find a payroll provider

When choosing a new payroll service provider, consider the following key features and benefits:

1. Compliance and security: Deel ensures adherence to complex US regulations, minimizing compliance risks. The platform includes automated compliance updates, built-in benefits administration, and robust data security measures
2. Integration capabilities: Deel integrates seamlessly with 68+ different tools and offers an open API, ensuring smooth data flow between your existing HR, accounting, and time-tracking systems
3. Customer support: Deel provides dedicated support teams, including an Onboarding Manager and a Customer Success Manager, to assist with any issues
4. Feature set: Deel’s platform offers comprehensive features, such as automated tax filings, direct deposits, benefits administration, and real-time reporting. The flexible reporting tools allow customization to meet specific business needs
5. Cost: Deel’s pricing model is transparent, reducing confusion over hidden fees and lowering administrative costs
6. User experience: The platform is user-friendly for both administrators and employees, offering an intuitive interface and self-service options for employees to access their payroll information and update details
7. Reputation and reviews: Deel is trusted by over 35,000 businesses and has received high ratings on platforms like G2 and Trustpilot, reflecting its reliability and customer satisfaction

Use these lists of payroll companies in the USA and beyond to get a better understanding of your options:

• 7 Best Payroll Software for Small Businesses: Comparisons and Reviews
• Best Payroll Software for Medium-Sized Businesses: Simplify and Automate Your Processes
• The 7 Best Enterprise Payroll Software for Effortless Global Payments

3. Onboarding process

Once you’ve signed on with a new provider, the company onboarding process will begin. This typically starts with creating an entity in the payroll platform, ensuring all company details are accurately entered.

Next, clients add their employees to the new entity. Setting the payroll schedule, including pay frequency and the first payroll cycle, is also a crucial step. For example, weekly, bi-weekly, or monthly payroll schedules can be set up according to the company's needs.

4. Employee onboarding

Employee onboarding involves confirming workers’ locations and tax residencies to ensure correct payroll tax filings. Employees must complete the necessary tax forms, such as IRS forms like W-4s for withholding information, and set up their bank accounts for direct deposits, ensuring timely and accurate payments.

5. Compliance and registration

Completing all state registrations correctly is vital, as missing or incorrect registrations can incur penalties. Each state has its own requirements and deadlines for payroll tax registrations, withholdings, unemployment insurance, and other payroll-related obligations, and failing to comply can result in significant fines and legal complications.

Deel can support your team with state registration and continuous compliance. Deel’s platform includes built-in features for managing state-specific payroll requirements, helping your business improve compliance across all jurisdictions. Deel’s in-house experts provide guidance on the necessary forms and filing procedures, assisting with the registration process from start to finish.

6. Payroll configuration

Next, clients review their payroll details, including gross-to-net calculations and payslip items, to catch any discrepancies before payroll is processed:

Gross-to-net calculations:

• Gross earnings: Verify that all hours worked, overtime, and salary amounts are correctly calculated
• Deductions: Ensure that all deductions for taxes, benefits, and other withholdings are accurately applied
• Net pay: Confirm that the final take-home pay for each employee is correct after all deductions

Payslip items:

• Itemized breakdown: Review each payslip to ensure it includes a detailed breakdown of earnings, deductions, and net pay
• Tax withholdings: Check that federal, state, and local taxes are withheld correctly
• Benefit contributions: Verify that contributions to benefits such as health insurance, retirement plans, and other programs are accurate

Clients can also typically make salary adjustments, such as adding bonuses, PTO payouts, or severance payments at this time. Approval of payroll must be done by the cut-off date, which is typically five business days before the pay date.

7. Funding and payment

Once payroll is approved, the funding request is automatically initiated. Payslips (also known as paystubs) are generated and made available to the employer, and employees see them on payday.

8. Post-onboarding

After the second successful payroll, the onboarding manager (OBM) initiates the handover to the CSM. The CSM provides ongoing support and ensures the client is comfortable with the new system. Clients and their workers can also refer to help center articles for detailed guidance on various steps, or use designated Slack channels and service desks for any issues or questions.

Signs it’s time to switch payroll companies

Frequent payroll errors

If your current payroll provider is prone to errors, it can lead to significant issues for your business. Errors in payroll processing can result in incorrect payments, leading to employee dissatisfaction and potential legal repercussions. Frequent mistakes can also erode trust between employees and management, affecting morale and productivity.

Poor customer service

If your current provider has slow response times, unhelpful support staff, or lacks comprehensive support options, it can cause delays in addressing payroll problems. Poor customer service can also mean longer downtime during issues, leading to frustration for both the payroll team and employees.

Lack of integration with other HR systems

Does your current payroll provider integrate well with other systems like HR management, time tracking, or benefits administration? For 43% of payroll leaders, syncing HR and payroll data between platforms is a struggle. It can lead to data silos and time-consuming manual tasks, and hinder your ability to manage employee information efficiently and accurately.

High costs and hidden fees

Payroll is typically the largest cost of any business. If your payroll provider has high service fees or hidden costs, it can strain your budget.

According to a commissioned study conducted by Forrester Consulting on behalf of Deel (January 2024), 42% of payroll leaders experience unexpected or hidden costs during the implementation of payroll services.

Unexpected fees can disrupt financial planning and force your business to allocate funds away from other critical areas. Evaluating the total cost of ownership, including any hidden charges, is crucial when assessing your current provider. For example, over half of surveyed payroll leaders have encountered unexpected or hidden costs related to exchange rate fluctuations following payroll implementation.

Inadequate reporting and compliance features

Accurate reporting and compliance are vital to avoiding legal issues and managing your workforce effectively. If your current payroll provider does not offer robust reporting tools or fails to keep up with compliance requirements, it can lead to significant risks.

One of the top challenges organizations are facing with their current global payroll systems is a lack of visibility into employee and payroll data (32%). This challenge has resulted in a limited ability to analyze employee data for 42% of decision-makers.

Inadequate reporting can also hinder your ability to make informed decisions, while non-compliance with regulations can result in hefty fines and legal challenges.

Common challenges and how to overcome them

Want to stay ahead of blockers that can impede your payroll transition? Here are the most common challenges teams face when switching to a new provider:

Data migration issues

One of the primary challenges during a payroll transition is ensuring that all data is accurately transferred from the old payroll provider to the new one. Inaccurate data can lead to payroll errors, compliance issues, and employee dissatisfaction.

Say that ABC Corp is transitioning from Payroll Provider A to Payroll Provider B. During the data migration process, an error occurs where employee John Doe's pay rate is incorrectly entered. John Doe’s pay rate is $25 per hour. However, during the data transfer, a typo causes his pay rate to be recorded as $250 per hour in Provider B’s system.

On the next payday, John receives a paycheck significantly higher than his actual earnings, causing a major payroll discrepancy. Overpaying employees can lead to compliance issues, particularly with tax filings and withholdings. When the error is corrected, John’s subsequent paycheck is much lower than expected, leading to confusion and dissatisfaction.

To mitigate errors like these, conduct a thorough audit of all payroll data before migration. Verify that all employee information, payroll records, and tax details are up-to-date and accurate. Implement data validation procedures to cross-check the information during and after the migration process.

Handling data compatibility

Data compatibility is another common issue during payroll transitions. Different payroll systems may use various data formats and structures, leading to compatibility problems.

For example, Company ABC is transitioning from Payroll System A to Payroll System B. Payroll System A stores employee data in a CSV format with columns that are not directly compatible with System B’s data structure.

To address this, work closely with your new payroll provider to understand their data requirements and formats. This could include developing a comprehensive data mapping plan to ensure that all data fields from the old system align correctly with the new system. Leveraging data migration tools and software that can automate and streamline the conversion process can also help minimize compatibility issues.

Integrating with existing HR and accounting software

Seamless integration with existing HR and accounting or payroll software helps maintain efficient workflows and avoid data silos. Integration problems can disrupt payroll processes and lead to redundant manual tasks.

To help, choose a payroll provider like Deel that offers robust integration capabilities. Work with your IT team and the payroll provider to configure and test integrations thoroughly before going live. Ensure that data flows smoothly between systems and that there are no discrepancies in payroll calculations or reports.

Employee questions and concerns

Employees may have concerns about the new payroll system, especially regarding paychecks or tax withholdings. To address these concerns, maintain open communication throughout the transition. Provide clear information on changes, their impact, and any actions required from employees, such as updating bank details or completing new tax forms. Or, offer a dedicated support channel for timely responses to employee questions.

See how Deel supports a smooth payroll switch

Whether you’re a small business or enterprise organization, you can streamline US payroll and consolidate your global payroll under one platform with Deel. From international contractors in Europe to EOR employees in Canada to direct employees in the US, Deel brings everyone under one roof.

With Deel, you can also run background checks on-platform, centralize your HR data, get visa support with Deel Immigration, and so much more.

Schedule a 30-minute platform demo with an expert to learn more.