How to convince leadership to switch payroll providers?

The latest EY Global Payroll Survey showed that only 42 percent of organizations questioned found it easy to conduct business with their payroll service provider. The remaining 58 percent of respondents indicated experiencing challenges with the payroll outsourcing services they were using.

Payroll is an essential business function that plays a crucial role for employee satisfaction and retention. When outsourcing payroll, businesses should make sure to work with a service provider they are absolutely happy with.

If a service provider doesn’t deliver, there is no other way but to find a replacement. One of the major hurdles in-house payroll teams have to overcome in this process is to persuade management that switching payroll services is really necessary. 

Here is how to convince leadership to switch payroll providers.

Convincing key stakeholders to change payroll providers can be a real challenge. There are several reasons for this.

Many businesses don’t consider payroll to be a value-adding business function. Instead, they just view it as a boring yet essential back-office function that gets employees paid but doesn’t warrant investing time and money.

The general feeling about payroll in many organizations can best be described along the lines of “As long as it works, don’t touch it!”. This attitude might save the business money because it avoids additional spendings, but it’s not the right strategy that will help you leverage the strategic potential of payroll.

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Before giving you some hands-on tips that will help you build a convincing case for switching payroll providers, let’s first look at the bigger picture. In order to acknowledge the necessity to change payroll providers, businesses first need a sound understanding of why payroll is important and what value it holds for businesses.

Payroll might not generate revenue, but it is still a very important business function. That’s because it:

• Has a direct impact on a business’s reputation,

• Helps attract and retain talent,

• Contributes towards preserving a business’s financial integrity,

• Is vital for ensuring compliance with tax laws and reporting obligations,

• Creates trust between the employees and the company, and

• Fosters employee engagement and motivation.

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Leadership won’t be easily swayed. So you will need a strong argument for changing payroll providers. Here are a few tips that will help you make a convincing case for the transition.

Find compelling reasons to switch payroll services

The first step is to assess the current situation and identify the main pain points and struggles you are experiencing with your current provider. There can be many different reasons why switching payroll companies is necessary. They include:

• Repeated failure to fulfill the agreed payroll SLAs,

• Poor customer support,

• Long response times,

• Low payroll accuracy due to frequent payroll errors,

• Lack of compliance,

• Inefficient processes, and

• Poor value for money.

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Focus on the value for the business

From a management point of view, every change needs to add value to the organization. This also applies to changing payroll providers. When talking to leadership about a possible payroll provider transition, you should focus on the benefits for the organization.

Depending on the issues you face with your current payroll services, potential benefits of switching providers could be:

• Improved scalability to accommodate changing payroll needs as the business grows,

• Better reporting to inform business decisions,

• Enhanced employee experience and satisfaction due to fewer payroll errors, or

• More time and resources that the in-house team can dedicate to value-creating tasks and activities.

Back it up with numbers

When it comes to investing money, numbers are always more convincing than words. Don’t just rely on your argumentation skills, but get some actual numbers that illustrate the benefits of switching to a different payroll service.

For instance, you could illustrate:

• How many payroll errors you have every month because of the provider,

• How much time you are spending on communicating back and forth to resolve payroll issues,

• How much time you could save every month when changing to a provider who uses a more advanced payroll software, or

• How much money you could save by changing to a payroll company with a pricing structure that is more suited to the business’s payroll needs.

Benchmark current numbers and figures against expected savings and improvements when transitioning to a new, better service provider.

Keep it short and precise

Management is always super busy and pressed for time. So, when the time comes to forward your proposal, make sure to keep it short and get straight to the point.

Prepare a clean outline of what you want to say and organize your argument in a consistent and logical way to make it as convincing as possible. Leave out anything that is not one hundred percent relevant and focus on aspects that clearly support your argument. 

Be clear about why now

Changing payroll providers might not be hard, but it requires careful planning and, above all, good timing. Expect leadership to be aware of this fact and plan accordingly when making a case for switching to a different payroll service.

The best time to switch payroll providers is the end of the (tax) year because this avoids all the extra work that comes with having to transfer tax-related information and data from the ongoing tax year from the old provider to the new one.

But changing providers mid-year is also possible when coordinating the switch with deadlines for tax filing. Make sure to gather substantial evidence that it’s really urgent to change to a different payroll company.

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Think ahead

Don’t leave things to chance. Head into the meeting well prepared. If leadership seems favorable to what you are suggesting, make sure to already have the next steps of the process outlined and ready for approval. This includes:

• List of requirements for the new payroll service,

• Payroll RFP template to send out to promising payroll services,

• Overview of the current terms of service to indicate the next possible exit date, and

• Possible timeline for the payroll transition.

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Getting leadership to agree to a payroll provider transition is not an easy task, but it is doable. All it takes is a compelling argument that combines necessity, urgency, and ROI. Here are the most important things to remember:

• Highlight the pain points you face with your current payroll service.

• Illustrate what improvements could be achieved through a payroll provider transition.

• Be clear about the ROI by backing your argument up with numbers.

• Focus on the value a provider switch would create for the organization.

• Stress that switching payroll providers is a relatively easy, straightforward process.

• Think ahead and have a project outline ready for actually making the transition.