Guide to Switching Payroll Providers

In business the partnerships that company owners must enter into – such as with payroll providers – don’t always turn out to be valuable. In the case of payroll, companies that have chosen to use an outsourced service are faced with a challenge in deciding which one to go with. And, sadly, sometimes the decision made is ultimately not the most beneficial one for your business. If this situation sounds familiar, and your business is considering a move over to a new payroll provider, make sure you’re well-prepared with our comprehensive guide.

Why change to a new payroll provider?

The main reason why a company might switch their payroll provider is due to problems with their existing service. Common complaints include;

Poor communication

After signing a contract and embarking on a partnership with some payroll providers, company owners might find that communication suddenly becomes sparser. This is, of course, very disappointing after weeks or months of regular contact, before engaging their services.

Lack of communication is problematic for a range of reasons, from not being able to provide employee updates when necessary, to not being told about network downtime. It’s important that the relevant staff within your company are able to get in touch with representatives at the payroll provider whenever it’s necessary, especially when it relates to the efficiency of your business

Loss of confidence

Another reason why you might be looking for a new provider is after having experienced reliability problems with the existing service. This could happen for several reasons, such as:

  • There has been a data breach
  • Non-compliance with legislation
  • The provider has paid staff incorrectly
  • The provider has paid staff late
  • The provider has failed to supply payslips

The cost of payroll errors can be significant – both financially and to company reputation – and may even drive away employees if trust has been damaged or lost. If your payroll provider has been the reason for an especially severe, or repeated, problem it’s likely that switching providers is a necessary step to securing a more effective service.

Too expensive

Some companies find that the initial cost they were promised by their payroll provider is not a true reflection of the price they’re then charged. Many outsourced companies actually bill their clients with hidden fees for various services that were either not originally disclosed or were not explained as having an extra cost. When working with a payroll provider you are likely to be tied into a contract, however, when this runs out it’s a good idea to switch providers and avoid hidden fees.

Limited service

Companies that have rushed into an agreement with a provider may come to find that they do not actually carry out all of the services that were expected. Whether this be liaison with HMRC, communications with staff, or something else, an outsourced payroll provider may not turn out to be what you thought they were.

Challenges involved with changing providers

The main challenges involved with moving to a new payroll provider centre on the administrative aspects. These are rarely as problematic as they first seem, however, and should not put you off moving to a new service that meets your needs better.

·      Too much administration

Some managers and company owners are put off moving to a new payroll provider because of the necessity to provide extensive company and employee information. While this can take some time, a quality payroll provider will have in place a system designed to make this process as quick and easy as possible. Plus, after the initial administration, very little – if any – attention will be required by the company to run payroll.

·      Expense

The benefits involved with switching to a new payroll provider should vastly outweigh the costs. Whilst there may be initial fees to get things set up and running, your regular monthly costs should reflect the service you’re receiving. Outsourced payroll has actually been known to lead to business cost savings.

·      Contractual ties

The most common difficulty when moving from one payroll service to another is contractual ties. Some outsourced payroll services require their clients to give at least six months’ notice before leaving, and contracts – while often annual – can last for up to five years. There are likely to be costs involved with leaving a payroll service early, which is another reason why companies might elect not to make the switch.

Benefits of moving to a new service

Despite the various challenges involved, the benefits of changing to a new payroll provider should make the switch more than worthwhile. When choosing a new service, be sure to check that they can solve all the issues you were experiencing before. Benefits should include:

  • Better communication – you should be able to contact your new provider whenever it’s required.
  • Reliable service – you should be able to trust that your staff will get paid correctly and on time, every time.
  • 100% compliance – your new provider should be approved by HMRC, and compliant with the UK’s employment legislation.
  • No hidden fees – only enter into agreement that clearly specifies what you must pay for the service you decide on.
  • Broader service – choose a provider that can offer everything you’re looking for, and be sure to communicate all of your expectations from the outset.

Changing payroll providers midyear

A concern for many companies is whether or not they can switch over to a new outsourced payroll provider midyear. While it can be simpler to embark on a new payroll partnership at the start of the financial year – on April 6th – this is not the only option.

Entering a new contract at the start of the financial year, or at the beginning of a new quarter, is often the favoured option because it helps tie up company books. Having said this, quality outsourced payroll companies will be able to help you make a transition as seamless as possible. If you do wish to switch providers midyear, this should not lead to any problems.

What questions should I ask a new payroll provider?

Deciding on a new payroll provider is half the challenge in making a switch. The best advice is to take your time and carry out plenty of research before making a choice. Ask around in business networking groups for recommendations, read plenty of reviews, and ask as many questions as you deem necessary. Try asking:

  • What reports do you provide and what information do they cover?
  • Do you take care of HMRC payments, and liaise with them on our behalf?
  • Do you offer online payroll services?
  • How will we be billed?
  • What is the length of the contract?
  • Who will be our main point of contact?

For further advice on choosing a new payroll provider, see our guide to questions you should be asking yourselves, as well as potential services.

Checklist for switching payroll providers

As you set about choosing a new provider, make sure you consider the following:

  • The length and terms of your existing contract
  • Your needs and service preferences
  • Reviews and recommendations
  • HMRC accreditation
  • Is there a clear and unambiguous contract?
  • Do you know who your point of contact is?
  • Is there a clear payment schedule?


Read further information on the benefits of outsourced payroll, or get in touch to find out if IRIS FMP offer what you’re looking for in a new provider.