Whether you are transitioning from doing payroll in-house to using a service provider, or are switching from one service provider to another, there are several important considerations you'll need to address to ensure a smooth transition. This includes evaluating the features and benefits of the new provider, assessing their customer support services and understanding the costs involved. There can be termination fees & notice requirements with your existing provider, as well as onboarding fees & timeline requirements from your new provider.
Planning on switching payroll providers? Here's what you need to know.
Typically, the easiest time of year to switch payroll providers is at the start of a new calendar year. The reason being you won't have to organize and submit any year-to-date back work (required for year-end tax purposes). By making the switch at this point, you can avoid potential errors associated with transferring partial-year data. Starting fresh with a new provider at the beginning of the year allows for a clean slate, simplifying the process of setting up new systems and ensuring that all payroll records are accurate and up-to-date from the outset.
Before Switching Payroll Providers
1. Issue ROEs for employees
If you are switching payroll service providers OR you are moving from in-house payroll to a new service provider, you must issue ROEs for employees or request that your current provider does this on your behalf, in order to capture employee's insurable hours under the previous method of payroll processing. These ROEs should be issued using Code K17—Change of Service Provider. You can find more information on when to issue an ROE here.
2. Request copies of your payroll register reports
This step is crucial if you are transitioning payroll mid-year. Payroll reports capture pay information including year-to-date earnings and source deductions. Your new payroll provider will need this information in order to accurately prepare year-end tax documents.
It is best to request records of all your relevant payroll information from your existing provider before making a switch. If you are able to download and save reports from an online platform, do so. Otherwise make the request to your provider before terminating your services.
3. Make sure any outstanding remittances are paid to the CRA
Whether you d payroll in-house or use a provider prior to onboarding with your new provider, ensure that you or your existing provider have paid any remittance owing to the CRA. Most payroll providers will NOT remit retroactively on your behalf. If this balance is left unpaid, you risk penalties and interest accumulating quickly.
4. Request employee pay stubs
Once you transition payroll providers, you may no longer have access to employee pay documents. Request copies of all employee paystubs (active & terminated employees) to ensure you have them for your records.
5. Clarify in writing that your old provider should not file year-end tax documents on your behalf
Submitting two sets of tax documents to the CRA can cause issues. It's advisable to clearly communicate in writing to your previous provider that you do not want them to file year-end tax documents for you.
Switching payroll providers is a significant decision that requires careful planning and attention to detail. By following the outlined steps, you can ensure a seamless transition that minimizes disruptions and maintains compliance with tax regulations. Planning ahead not only simplifies the process but also provides peace of mind, knowing that your payroll operations will continue smoothly with your new provider. Taking the time to prepare and organize these elements in advance will ultimately save you time, reduce stress, and set the stage for a successful partnership with your new payroll service. For more information on payroll processing download our Ultimate Payroll Guide.
