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How to Switch Payroll Software - and When

If you’re wondering about the best time to switch payroll providers and how to do it, this switching payroll companies checklist will help with the process.

6 min read

How to switch payroll software and when

Paying your employees the right amount on time requires proactive planning. It can also take up a lot of time.

If paying your employees is currently a time-intensive process for your business, it may be time to start thinking about switching payroll providers. The right software can simplify the process and make tax compliance as easy as possible every year.

This article will walk you through the process of making the switch, and when to do it. This will leave you fully prepared for pay day, any day of the month.

The best time to switch payroll providers

The new tax year kicks off on the 6th of April each year, and runs until the 5th of April of the following year. Switching payroll providers around this time is a great idea for a couple of reasons:

1. You’ll have a few weeks between the end of the tax year and April’s month-end payroll to switch payroll providers. This should be enough time to let everyone know about the move, and to train the relevant members of your team about how the new software works.

2. You won’t have to carry over any historical data from the previous tax year into the next one. The business gets a clean break, and you don’t have to worry about compatibility issues (or human error) from information swapping between non-compatible platforms.

The start of the tax year is the most efficient time to change payroll providers.

Tax changes for the 2021/2022 tax year

Each year, the UK government announces a number of changes to tax thresholds, rates and codes. This is another reason why changing your Payroll software at the start of the tax year makes accounting easier.

QuickBooks’ help hub provides an up-to-date overview of the tax changes for the 2021/2022 tax year.

Changing payroll providers mid-year in the UK

Changing payroll providers mid-year might not be recommended, but it isn’t impossible. The first thing you’d need to check is whether there is cross-compatibility between the two providers, so you can import any historical data from the current tax year automatically. The last thing you want is to be entering all values manually, even if you have a relatively small workforce.

Luckily, most providers do what they can to make switching as easy as possible. Focus your efforts on making sure that there is nothing in the small print that might incur additional costs to your bottom line (like a 30-day notice period from your old provider), or something that might disrupt the upcoming payment run in any way.

Switching payroll companies? This checklist will help

If you’re planning on switching payroll companies at the start of the upcoming tax year, here is a checklist to make the process as simple as possible:

1. Research and find a new payroll company. Look for a new payroll software that meets your current and potential future needs. It’s important to consider the functionality itself, the overall cost of the system, as well as the benefits you’ll receive.

2. Test the new payroll software. This will help you to establish which system is most user-friendly and suits your business best. It also allows you to compare customer service. If you have a lot of employees or complexity in your payroll (like multiple statutory payments or court orders), it’s useful to run both systems side-by-side. That way, the testing will pick up any distinct differences in outcomes.

3. Decide if this is the right payroll service for your business. If you are not the only decision maker, talk to the members of the team who will be using the software the most before you make a final decision.

4. Close off the current tax year. Ideally, do so right after payroll has been processed, so you will have plenty of time to finalise the move before the next payment cycle.

5. Send your final report of the year. It’s generally best practice to do so on or before your employees’ last payday of the tax year. You will already have been making your full payment submissions (FPS) each pay run throughout the year, and this report should just be verifying the numbers. In some cases, you’ll need to send an employer payment summary (EPS) instead. In either case, your end-of-year submissions will need to be sent to HMRC before the 20th of April.

6. Provide employees with their end-of-year forms. Employees’ P60 forms summarise their total pay and deductions for the year, and have to be provided by the 31st of May. You also need to report on any benefits in kind - such as private healthcare, company cars or interest-free loans - through a P11d, which needs to be submitted by the 6th of July each year.

7. Set up your new payroll software. You may have already taken a few of the steps to set up the new software during the trial period. Wrap up the process by adding in any additional information, so you can start the new tax year off on the right foot.

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Simplifying year-round payroll switching

If you’re on the lookout for a new payroll provider who can help you speed through every pay run, consider the QuickBooks Online Standard Payroll system.

It offers a quick and painless setup process thanks to the FPS importer, which can automatically import all the important information about your business, including:

  • Company and employer details. This includes your company name, address, employer PAYE reference number, pension information and other employer data. Try to make sure you have your pension reference information, all details of the employee and employer contributions, the taxation method used, and whether you have used qualified earnings thresholds for the calculation of contributions on hand.

  • Employee details. QuickBooks’ FPS importer tool will import the details of your employees automatically, including name, address, date of birth, national insurance number, tax code pay day, and the payment method.

Pro tip: Check out a handy feature called pensionsync, which was designed to automatically pull updated pension information from supported providers back and forth between the systems.

  • Information related to changes in the new tax year. With QuickBooks Online Standard Payroll, the majority of the changes made by HMRC are automatically integrated into the software. These can range from changes to tax codes, student loans, statutory payment rates and even the minimum wage.

  • Final review of employee payroll records. Once everything has been added to the system, a final review helps to double check everything before the first payment run of the new tax year.

Now that you’re equipped with everything you need to make the switch, it’s time to choose your payroll software before the current tax year ends. Your business will be running more efficiently before you can say “Happy Bank Holiday” to your colleagues and clients at the start of May.

Payroll made easy Feel you’re better informed about switching payroll software? The QuickBooks blog covers a wide range of business-related topics – it’s all part of our mission to help small businesses grow.