Checklist for Changing Payroll Providers in the UK

You might want to change payroll providers for several reasons, such as costs, problems with your current provider, or changing business needs. However, with payroll companies handling all your sensitive business data from HMRC tax submissions to employee salaries, it’s natural to be worried about disruptions.

Our expert guide will help ease some of your worries, by laying out a clear plan for changing payroll providers, when you should switch and what the benefits of opting for a better payroll solution could be.

Changing Payroll Providers Checklist: 8 Essentials

Following this checklist for switching to a new provider will ensure the process is as smooth as possible:

1. Do your research and find a new provider

First, find a provider that fits your business needs. Look for clear pricing (without hidden costs) that aligns with your budget, more efficient services (like automated payroll or employee portals), better communication, and strong onboarding support to simplify the transition.

2. Check your current contract

If you’re tied into a contract, it may be harder to leave when you want. We suggest you review your current agreement for any notice periods or restrictions. That being said, if you’re on a monthly subscription, you’ll have more flexibility to leave anytime.

3. Pick the right time to switch

Switching at the start of the tax year (April) is ideal for cleaner reporting and less hassle. This makes for a much smoother process, as year-to-date (YTD) reporting is cleaner.

Mid-year switches are possible but typically involve sharing your latest YTD figures with the new provider, some extra paperwork and risks of overlapping payment errors. We’d only advise doing this if you’re encountering major issues with your current provider.

Read more about this in our best time to change your payroll provider section, further down this page.

4. Notify your current provider

Once you’ve settled on a prospective date to make the switch, you’ll need to let your current provider know the date you are leaving.

This is important, especially for tax purposes, and to ensure a smooth transition. That’s because they might be able to help you collect and find all the necessary data you need to give your new provider.

5. Collect all necessary data for the new provider

Gather and share key information like:

• Employee details
• Salary details
• Bank account details
• Company information
• Relevant tax information

Some providers may offer integrations with HR systems, but you’ll likely need to clean and organise the data yourself. Still, you’ll probably be moving to a more advanced platform, which means some admin processes may no longer be relevant (saving you time in the process).

6. Coordinate tax filings and payments

Clarify with your new provider who will handle 1) the real-time information (RTI) submissions to HMRC and 2) when the responsibility will shift. This guarantees no missed deadlines or duplicate filings.

If your new provider is full-service, you’ll need to determine the new process for capturing changes from HMRC notifications for tax codes and loan notifications.

7. Notify your employees

Inform employees well in advance. Advise them to download payslips from the current system and be vigilant for any discrepancies during the transition.

8. Carry out parallel runs

Perform a parallel run where both providers process payroll and generate any relevant reporting, but payments are made only through the old system. This helps verify the new setup is accurate before going live and assures you that the switch has been done correctly.

Reasons to Change Payroll Providers

There are several reasons you might want to change providers. Here are some of the most popular:

• Bad communication – miscommunication or simply bad communication can affect the efficiency of your business. If you find it hard to get in touch with your payroll provider or get answers to your questions on time, it might be time for a change. 
• Unreliability – your current provider might be unreliable, which could have led to severe issues for your business, such as employees not being paid on time or being paid incorrectly. 
• Size – your business may have downsized or grown, which means you need a provider that more accurately reflects your business size and needs.
• Price – Your current provider could have become more expensive, especially if hidden costs and charges have padded your invoice, leading you to look for a company that better suits your budget. It can be a pain to reconcile invoices to the expected cost, so it’s important to keep on top of these.
• Inflexibility – there are three common pay frequencies: weekly, bi-weekly, and monthly. You may want to pay your employees with multiple frequencies, whereas your provider has limited you to just one or two. 

If you haven’t yet found a new payroll provider, use the reasons why you want to make a change to help inform you on your search. Identify what’s most important to you, or the problems you currently have, so you can find a provider that’s right for your business. 

Best Time To Change Payroll Providers

Timing is everything when it comes to switching payroll providers. A poorly timed change can lead to payroll disruptions, compliance headaches, and stressed-out employees as a result. But choose the right moment and you’ll save yourself time, money, and a lot of hassle.

When’s the optimal time to change? We would argue that switching in time for the start of the next financial year is the gold standard: in other words, on or around 6th April.

That’s because it provides a clean break. All payroll records reset at the start of the tax year, meaning your new provider can begin fresh without carrying over any mid-year data quirks or potential errors. It’s easier to reconcile annual reports, such as P60s, and align everything with HMRC requirements.

Can I switch payroll companies mid-year or mid-quarter?

While the start of the financial year is a natural point of change, switching outside of that period isn’t a problem. We think the second-best option is the start of a new quarter or pay period. For example, if you run monthly payrolls, transition at the beginning of a new month. For weekly or biweekly payrolls, aim for the first pay cycle of the quarter. This should reduce the risk of data mismatches and make onboarding your new provider much smoother.

Still, as we said further up this page, we recommend you avoid switching mid-pay cycle if you can help it. The overlap can create confusion, leading to delayed or incorrect payments. If you have no choice but to switch mid-cycle, make sure both providers are fully aligned on who is processing what and when.

Common Mistakes to Avoid When Changing Payroll Providers

There are lots of pitfalls involved with changing payroll providers. Here are the most common mistakes you want to avoid to ensure a smooth transition to your new payroll provider:

• Misunderstanding pricing: Payroll pricing is not always straightforward. For example, there may be discounts for businesses of a certain size, or one-off charges for implementation. Make sure you assess all potential costs so you aren’t hit by unexpected charges.
• Not informing stakeholders: Payroll affects several stakeholders and it’s important that any links to your payroll are involved in the switch. Inform all the relevant stakeholders in order to prevent any errors.
• Lack of integrations: If your new payroll software is being integrated with an HR system, the new provider will need to rebuild these integrations. Failing to be aware of these impacts can lead to broken reporting and data errors.
• Not staying on top of any unique policies: Your company may have a unique company scheme that your new payroll provider will need to be able to accommodate. Before making the change, ensure the new provider can meet your business needs and, during the turnover, keep an eye on the new provider to prevent any issues with pay.
• Running out of time: Ensure that you allocate enough time to conduct parallel runs between the previous payroll provider and your new provider. This will allow you to address any teething issues and eliminate the risk of employees not receiving their pay on time.