The Ultimate Guide For Switching Payroll Providers

It’s so important to find the right payroll provider for your business. The right payroll provider or payroll software should be able to help you automate certain tasks and ensure that your business remains compliant with HMRC. 

The right payroll provider should also simplify tax filings and streamline financial reporting and services. 

However, as your business grows and expands you might need a different payroll provider to the one that you currently use. This can be for many reasons such as you need to pay employees more efficiently or you want a more cost effective option. 

Explore our guide below to understand how switching payroll companies works and why it might be the best option for your business.

When should you switch payroll providers?

We would recommend that you switch payroll providers between tax years. If this option isn’t available, the next best time to switch is between quarters. 

These options are the best for your business because it ensures that you won’t have to carry over any historical data – risking confusion and mathematical errors.

As a business owner, you need your payroll provider to file several forms to HMRC on your behalf. The easiest time to do this is between tax years, because they need detailed information on your business and employees. 

If you need to switch your payroll provider midway through the year, it’s crucial you have all this information to hand before you do so. If you can’t find the information when required, this could result in delays and mix-ups which in turn could cause you to receive hefty penalties and fines from the government.

What does switching in the new tax year involve?

Switching in the new tax year is often the easiest option for businesses looking to change their payroll provider, for numerous reasons. 

Firstly, you will face fewer compatibility issues when switching your payroll provider in a new tax year. Sometimes certain systems or processes between your new and your old payroll provider will not be compatible with each other.

Perhaps your old payroll provider utilises multiple payroll software systems for all the functions needed, whereas your new payroll system only uses one software system. In these instances, it’s better to start with a clean slate than painstakingly migrating everything over. 

Secondly, by switching in time for a new tax year, there’s less chance of human error because you won’t need to migrate data manually, as you’re starting your payroll system anew. 

Thirdly, you must also be aware that the UK government will make yearly changes to taxes. If you change payroll provider to coincide with the new tax year, you won’t have to worry about potentially entering wrong tax information.

Is changing payroll providers mid year possible?

If it’s necessary for your business to switch providers during the year, this is completely possible. However, it is far easier to switch in the new tax year or in a new quarter. Therefore we would recommend that you take extra care when switching providers at any other time. 

For this reason, detailed timelines are completely key and it will help you to know exactly which stage of the transition you’re at. 

You don’t want the transition to affect your employees getting paid on time and neither do you want the provider to overlap so they duplicate filings. It’s also important to avoid paying two providers at once. 

Check if your current provider has cancellation fees which may be incurred if you choose to switch to another provider halfway through the year. 

It’s also good to consider whether your new provider will help you through the switch, and if not, whether it’s worth the hassle to change mid-year or not.

What are some good reasons to switch payroll providers?

There are several reasons why you may want to switch payroll companies. These are some of the most common reasons why companies look into switching payroll providers: 

  • Bad communication – If you struggle to get in touch with your payroll provider it may be a good time to switch. Time is money and if you can’t efficiently communicate with your payroll provider, this could impact your business’ efficiency. 
  • Lack of reliability – If your payroll provider is unreliable this could be a warning sign. This could lead to severe issues for your business, including employees being paid incorrectly or not on time. 
  • Size – If your business has downsized or expanded, your current payroll provider may not be the best fit for your company, and you’ll need to look for a provider that more accurately matches your business’s needs. 
  • Price – Maybe hidden costs and charges have padded your invoice and your current provider’s bill has become increasingly expensive. It’s best practice to find a provider that best fits your budget.
  • Inflexibility – There are three different pay frequency options – weekly, bi-weekly or monthly. Sometimes you may want to pay your employees with multiple frequencies but your current provider may have limited you to one or two.

What should you consider when switching payroll providers?

There’s a lot to consider when switching payroll providers. You should try to analyse what you don’t like with your current payroll provider and if anything can be done to improve this situation. Consider the right questions to ask when switching payroll companies. 

You should audit what’s not currently working with your current provider so you can identify exactly what the main issues are that you would like to be resolved. List your must-have features to help narrow down the best payroll provider for you.

When deciding between payroll providers, it’s also important to assess whether the transition will take a long time and how long it will take to set up. Alongside these considerations, you should read reviews and customer testimonials to see how the provider treats their customers. 

You should also consider how easily the payroll provider can be integrated into your existing accounting software, and you should work to ensure cross-compatibility between your old and new providers and your existing software. 

It goes without saying that your new payroll provider should be HMRC compliant as well.

What common mistakes should you keep in mind?

One of the major mistakes that companies typically make when switching to a new payroll provider is not giving themselves enough time for the transition or planning poorly. You need to consider how to change payroll companies seamlessly.

Any delay or interruption to your payroll could have a direct impact on your employees’ pay, benefits, wellbeing and attendance.  

The way you can avoid this is to find a provider that truly understands your company. 

You should also avoid signing up for cheaper solutions without considering the ease of use or how this software will integrate with your business.

How can you switch payroll providers to ensure a seamless transition?

Now you know what to look for when choosing a payroll provider, here’s our guide to making the switch as effortless as possible.

Step 1: Define the new payroll provider’s responsibilities

You are legally responsible for keeping record of all your employees on your payroll. However, a payroll provider can manage these details on your behalf. This can include both providing payslips and making payments to HMRC. 

There are two separate categories of payroll services. Full-service payroll means that the payroll provider will do everything for you, whereas a DIY payroll service will do the bigger tasks for you – like taxes and calculating pay – but will leave the smaller administration tasks up to you. 

Once you know what your preferences are, discuss them with your payroll provider to find the right solution for you.

Step 2: Find out your existing payroll provider’s terms of cancellation

You need to figure out both a smooth onboarding and offboarding process. You might have to wait till the end of your contract to terminate the service, but if you use payroll software you’re more likely to have improved flexibility. 

Once you’re clear of any hurdles, you can contact your existing payroll provider and make it clear to them that you will be terminating your contract with them. Ask what steps you need to take to undergo the switch. 

Make sure to leave this step with plenty of time because different providers will have different requirements in regards to timeframes and switching providers.

Step 3: Organise your finances and payroll for your new provider

Next, you’ll need to contact your new provider and ask them what you need to get started. You want to make sure to do this far in advance so you’re well prepared for any kind of delays. 

Your new payroll provider may require these things off you:

  • Your business information
  • Your employee’s details
  • Payroll records

Step 4: Start the migration process

During the migration process, you must talk to your new payroll provider to check exactly what you need to do to move all the relevant information over to the new provider. 

Double check what transition services they provide, as they might be able to help you out during this time.

Step 5: Stop working with your old payment provider

It’s time to stop working with your old provider. Send them a final message to remind them that you are transitioning to a new provider. Use this time to double check you’ve done everything necessary and that you’ve informed the right people and you’ve shut your service down in the right way. 

Confirm that everyone is on the same page so you don’t end up double billing two separate payment companies.

Step 6: Let your employees know about the switch

Finally, let your employees know about the switch so they’re kept informed in case of any potential misunderstandings or mistakes in the future.


By following all the steps in our guide too, you can make sure that changing payroll providers can be a breeze. 

Make sure you have a clear understanding of what you need, facilitate clear communication between you and both your new and old payroll companies and research the new company well. 

If you leave yourself enough time to switch, it should be an easy change that will benefit your employees and the company.