So, you’ve made the decision to switch to a cloud platform for your payroll, or perhaps are considering switching your third-party payroll provider to a partner that will provide greater transparency, English service, efficiency, and of course, a smart cloud-based software. But you may be wondering what happens to your payroll data when you change payroll vendors.
That’s a natural concern, because you’ll need access to the data for historical purposes as well as current-year employee information, and you are obliged by the Japanese authorities to keep your payroll data for the previous 3 years. So, what information should you preserve – and how? At JOS we have handled this migration dozens of times, and we know what’s involved when you change providers.
What information do I need to switch payroll providers?
When you change payroll providers, generally, you’ll need to provide basic information to get started with the new vendor. That information can include:
Your business information, including legal name, company registry, address as well as your business overview and structure
Banking information if you wish the provider to also manage your payroll deposits
Past tax returns and forms that have been filed
Your employees’ personal information including my number, employment contracts, and general onboarding documents.
Year-to-date payroll information if you are making the switch in the middle of the year.
You’ll want to find out what kind of support your new provider offers during implementation in case you have any questions or need help when providing this data. In most instances, the new company can provide you with a template and schedule so you know exactly what information will be needed and when. Either way, it’s important that you be involved in extracting and reviewing that data both before and after it’s transferred to your new system.
How do I migrate payroll data?
After you’ve provided the basic information and begun the process of switching to your new vendor, you’ll want to make sure they have access to all your payroll history as well as any changes you may be making during the process. Typically, you’ll need the following but be sure to ask questions if you are unsure of what payroll information is needed:
Employee data for current and terminated employees during the year
Payroll reports,
Pay history with details, including total hours, earnings by type (overtime, bonus, salary), deductions by type (retirement, medical), taxes by type, and any employer-paid items by type.
Once your new provider reviews the data there is usually at least one handover meeting with the old provider, a chance for the new provider to clarify any questions they have about the data and request additional information that may be needed.
If you are already on a cloud platform, then you will need to give the new provider access. But if your previous system was a traditional desktop software, the relevant historical files will need to be downloaded and formatted into something that can be easy to upload into the cloud software (your softaware will most likely have an excel/CSV template). Very importantly you will want to ensure that payroll information goes to the new provider securely. Any data breach is bad, but a payroll data breach could be catastrophic for you and your employees. Providers should always use secure emails with password-protected folders for depositing files and also when sharing via file share sites. Either way, the information should never be emailed insecurely.
After you’ve transitioned your data, you’ll want to review the information for any import errors. It’s also a good idea to keep a running list of any changes you made to your current employees from the time you pull the data until you are trained on the new platform. This step ensures all updates are made so that the systems mirror each other prior to your first processes on the new platform. *Good providers will run a shadow payroll of your last month to make sure the calculations are matching and are correct with the old software and to work bugs out of the system.
How long does it take to transition my payroll data?
With cloud technology, the time required to migrate your historical payroll data is fairly minimal. Depending on the platform you use, and the size of your payroll it could range from a matter of days to several weeks.
However, since data is just one piece of what’s required when changing payroll providers, you should plan on enough lead time with your new vendor to make sure you can meet your desired switch date.
If you’re a smaller company, it may take as little as a few days to complete your implementation. For larger businesses, it could take weeks or even months to get your payroll set up, depending on the number of employees you have. While cloud technology makes the transition easier, in general, the best times to change are still at the end of the year or the end of the quarter since payroll requires that you file tax forms with various agencies quarterly and annually. Transitioning during these times will help eliminate confusion and issues with filing and paying taxes.
What data will be available to me with my new vendor?
When you migrate your payroll data to your new payroll provider, you’ll likely have some choices when it comes to the data you move.
If you’re switching payroll providers mid-year, you can bring in all your payroll history for the current calendar year by the employee. Depending on your circumstances, that data will be loaded quarter by quarter or check date by check date. Either way, the employee’s year-to-date (YTD) totals should be the same from system to system.
If you are switching at the beginning of a year, moving the prior year’s data is your choice. However, the employee data entered for a clear year start should still mirror your prior system. Often you can contact your previous payroll provider for additional access or to possibly migrate your data to cloud-based storage for future reference. You should note that some companies may increase the implementation fees to load in the prior year’s totals.
What’s important to know as an employer is that you’re required to keep records that were used to calculate pay such as hours worked, total wages per pay period, date of payment, payment basis, additions to or reductions in wages as well as employment taxes paid for at least 3 years for compliance. This is also kept in paper format in Japan, so these files will also need to be sent to the new provider for storage management and easy access if an audit occurs.
If you’re considering switching payroll vendors, please contact us for more information on our summer special of FREE MIGRATION AND SET-UP TO CLOUD!