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Making Payroll Transition Easy: Process For Switching Payroll Outsourcing Service Provider

Nena Petrovic
Global Sales Director
January 5, 2022

Answer these questions:

  • Are you struggling with payroll accuracy?
  • How challenging is outsourcing?
  • Are you facing trouble communicating with your current provider?

If you were nodding all along, learn how you can switch your third-party payroll service.

Why Switch Payroll Outsourcing Service Provider?

How do you know if this is the right time to switch payroll outsourcing service providers?

What key markers can help you make the decision?

The simplest – and most obvious – sign is that you will feel the discomfort. If a payroll management system is not serving your business well, you will know. You will face difficulty in communication, there will be efficiency lags, accuracy will be the last thing, and you will not get the desired productivity.

If you see these signs, it is time to switch your payroll outsourcing service provider.

Challenges Faced during  Migration of a Payroll Management System

A couple of years ago, even the thought of changing payroll outsourcing service provider would have given you a week full of stress. This is because there were so many manual activities and the data was being stored disparately in many systems.

Today, migrating data is less challenging. There’s more support from the modern third-party payroll service provider in India, you have advanced tech and migration options. Therefore, you can migrate to a payroll management system smoothly.

However, there are still some minor challenges that companies face. Check out these challenges and know how you can smoothly move to a new payroll outsourcing service provider.

Data Migration

When you are switching to a new payroll outsourcing service provider, the first thing that might bother is your data. How will you migrate your data to the new payroll processing company? How time would it take for this transition?

Many employers only hesitate to switch for this reason because they don’t want to go through the hassle of data migration. There may be compatibility, data loss, hardware, and disorganization challenges.

The only way you can mitigate these challenges is by planning ahead and researching for your payroll outsourcing service provider.

Payment Schedules

When you have several categories of employees in your organization, you naturally end up paying them in different formats and at different times. For example, freelancers may be paid weekly but permanent employees get a monthly payment.

Calibrating these payments again with the new payroll processing company is crucial, you have to start again, set up the payment methodology of every employee, and create a new structure.

With the right payroll outsourcing service provider, you can mitigate these issues. The expert professionals of the team may help you create a standard structure.

New Contract

When you are switching to a new payroll outsourcing service provider, you may have to sign a new contract. A major challenge that you might face here is rectifying the issues that you faced in the previous contract.

Unknowingly, you may sign up for the same issues. In place of this, evaluate your previous contract carefully and find loopholes. Understand change requirements and the process for it.

Time Management

Finally, the last challenge faced while migrating to a new payroll processing company is efficient time management. It takes time to migrate your data, move your entire structure from one payroll outsourcing service provider to another. This time can be hectic for your organization.

You can find a provider with the right expertise to deal with this challenge. With experience, a third-party payroll service provider in India helps you migrate smoothly without glitches, which helps you save time.

Change Payroll Outsourcing Service Provider: Here’s What To Keep In Mind

Payroll processing companies make it simpler for you to switch to a new payroll management system anytime, but it is best to make this transition during the new fiscal year. This will help you keep your financial records organized. You can easily have legacy data and current data.

Of course, there’s no harm in shifting to a new payroll outsourcing service provider between the fiscal year.

Check how you can smoothly transition to a new payroll processing company through a series of calculative steps:

1.     The Time

The time when you are moving to the new payroll outsourcing service provider is the key to helping you make this transition smooth.

Therefore, the first thing to evaluate is when you are moving to a new payroll outsourcing service provider. If it is between the fiscal year, then the transition will be naturally complex. In this case, all you can do is find the right payroll management system to make the migration smooth.

Think about it, your taxes, financial calendar, and payroll may be all over the place if you make this transition mid-year.

Another thing to consider is the contract you have signed with the previous payroll outsourcing service. If there’s still time in this contract, consider completing it to avoid overheads.

Additionally, you also need to understand that it is best to give time to this implementation. If you switch at the end of the month and ask your new payroll processing company to dispatch payroll correctly, that may be not possible. Therefore, only switch payroll outsourcing service providers when you have the bandwidth and time to manage payroll for that month.

2.     Services

What type of payroll services do you need?

The point here is not knowing what your previous payroll processing company was offering. You need to understand what type of payroll services your organization needs.

  • Customer service
  • On-time payments
  • Tax returns
  • Reporting

Ultimately, it boils down to the services you need from your payroll outsourcing service provider. Once you have these pointers in mind, you can select the right payroll processing company.

3.     Terms of Contract

Before you migrate your payroll outsourcing service provider, you need to have a look at your current contract. What type of clause they have included in your SLAs. If the contract says that you need to stay with the company for 30 days before leaving, you have to follow the same.

For example, a 45-day notice or cancellation fees amounting up to INR 30,000.

Based on the contract, you should make a wise decision.

4.     Research

The next step is to research the right payroll outsourcing service provider. When you have finally decided to move towards a new payroll outsourcing service provider, you need to assess the potential of different companies offering the same services.

Here are some questions you can consider asking from your payroll processing company:

  • How well do you serve customers? What is included in your customer service?
  • Will it be possible to talk to dedicated professional about challenges?
  • What’s the support structure for migrating data?
  • What is the payroll software?
  • How efficiency are employee and HR self-service portals?
  • What is the security structure?
  • What is the course of action for payroll mistakes?

Through these questions, you would be able to gather information on how the payroll processing company serves its customers. However, this will only give you an overview of how well the payroll processing company can serve you. For more details, you need to know the following:

  • Expertise in the industry
  • Google Reviews
  • Costing in relevance to competitors
  • Services
  • Inclusions
  • Hidden charges

When you have evaluated all of the above factors, you can gather this data to get started:

  • Business details
  • Employees’ details
  • Legacy payroll data
  • Legacy and new payroll structure
  • Tax details
  • Quarterly return details
  • Payslip formats

5.     New Contract

Finally, before moving ahead with this decision, you have to understand the details of the new contract. Know the fees, hidden charges, migration clauses, and key responsibilities included in your contract. Evaluate every line on the contract for clarity. This will help you understand the level of services your payroll processing company will offer. Further, you can start relying on them with legal proof, which will help create a valuable relationship with the payroll outsourcing service provider.

Don’t forget to evaluate if the new contract fills the loopholes that were in the previous contract. If possible, compare to find a feasible deal. Discuss the terms of the contract to clear challenges.


If you are facing issues in managing payroll with your current payroll processing company, it may be time to switch your payroll outsourcing service provider. Evaluate the timing, understand the challenges that might stand in your way, and carefully move to a new payroll outsourcing service provider. Use the above guide to understand the issues and procedure to migrate to a new outsourcing partner.

TopSource Worldwide is a leading provider of many services including payroll outsourcing, employer of record, HR support, and other consultancy services. Whether you are operating locally in India or in the global market or both, TopSource can offer seamless local and international payroll outsourcing services.


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Nena Petrovic
Global Sales Director
Nena Petrovic is the Client Advisor Team Leader at TopSource Worldwide, a leading Global Expansion services provider. She oversees and guides a team of client advisors, who communicate and collaborate with clients effectively. She is responsible for ensuring the accurate and timely processing of client invoices and payroll, as well as developing strategies and maintaining a client-centric approach.

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