Can I change my payroll system in the middle of the tax year?

Can I change my payroll system in the middle of the tax year?
Can I change my payroll system in the middle of the tax year?Can I change my payroll system in the middle of the tax year?

A question often-asked is when is the best time to change payroll systems and is it possible to change payroll systems in the middle of the tax year? 

Yes, it is possible and, whatever time of the year, changing payroll systems comes with various considerations and implications. In this article, we’ll run through some of the things to think about and best practices to adopt when making a change to a new payroll system, so you can make a more informed decision on when is the best time to change payroll systems for the good of your employees and your business.

What are the considerations of changing payroll systems in the middle of the tax year? 

One of the most critical considerations is ensuring that your business remains compliant with UK tax laws and HR regulations throughout the transition to a new payroll system. Another is making sure that employee data is properly protected. 

You may have seen some of the high-profile attacks on payroll companies, so, as part of your due diligence, it’s critical that your new payroll company can demonstrate the highest levels of data security to protect your business, your employees and your reputation. 

ISO27001 is a standard that you should demand of your payroll company. ISO27001 is a voluntary standard, but many organisations choose to implement it to enhance their security position and demonstrate their commitment to rigorous standards of security.

Changing systems mid-year can be a little more complex than at the start of a new tax year, but if you can supply the required data, your new payroll provider will be able to move into the onboarding process with ease. 

As part of your onboarding process, your new payroll provider will require the following information if you’re transferring systems mid-year:

  • All previous employee year-to-date information for HMRC balancing – this means each of the Full Payment Submission (‘FPS’) files back to the beginning of the current payroll year (April onwards) or the P11 file
  • All relevant employee data including personal contact information and salary information
  • Year to date pension data

The new payroll provider will work to source this information and may be able to work with the incumbent supplier for the safe transfer of the employee data.

Once this information is received, the new service provider can configure their payroll system as per your service agreement and prepare for the next stage of changing over to the new payroll system. 

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Another consideration is that employee expectations must be carefully managed. Changing the payroll system can be disconcerting for employees, as they’re accustomed to a certain process and timing for their pay. With a change in payroll systems, whatever time of the year, employees may feel higher level of stress and worry about the risk of not being paid correctly or on time. 

Uncertainty and lack of knowledge about the implications of a changeover of payroll systems could affect their financial or emotional wellbeing, or their levels of productivity. 

It’s therefore essential that the changes are communicated effectively to employees and the process is explained to them, paying particular emphasis on telling them that rigorous testing will take place and what the business will do to ensure that payroll data is correct. 

Accurate data transfer is, of course, paramount. Errors in payroll data can lead to over payments, underpayments, compliance issues and pressure on both employees and employers. Ensuring data integrity during the migration process is, therefore, crucial. 

Employers should work closely with both their incumbent and new supplier to ensure that data transmission is seamless, effective and error-free. The new payroll company should have systems in place to ensure that data is transferred correctly, can be tested and that payroll is accurate.

Not all incumbent suppliers will be as helpful as others, unfortunately, however most are accommodating and professional. When they are, the two suppliers can connect to effect the transfer of current and required historical data.

Running payroll in parallel between an incumbent and a new payroll supplier can provide several benefits and serves as a valuable risk mitigation strategy during a transition. This is where both suppliers run the same payroll data on their systems, with the incumbent paying the employees, usually for the final time before the changeover takes place. The benefits of running parallel payroll include:

Error identification and resolution:

Running parallel payrolls allows the employer and new provider to identify discrepancies, errors or inconsistencies between the two systems. Early detection enables issues to be resolved promptly before they affect employees' pay or compliance with tax regulations.

Data validation:

This activity provides an opportunity to check and validate the accuracy of data migration from the old system to the new one. This includes verifying employee information, pay rates, deductions and tax calculations.

Compliance assurance:

Parallel pay runs help ensure that the new payroll system is fully compliant with local tax laws, regulations and reporting requirements. Any compliance issues can be addressed before they lead to legal or financial consequences.

Employee confidence:

Maintaining consistency in payroll processing during the changeover period helps build and maintain employee trust. Employees can rely on receiving their pay on time and accurately, reducing concerns or disruptions.

Testing system functionality:

Functionality of the new payroll system can be fully tested under ‘real-world’ conditions. This includes verifying automated processes, reporting capabilities and other features to ensure they meet the needs of the business.

Training and familiarisation:

Parallel runs offer an opportunity for an employer’s payroll and HR teams to become familiar with the new system. They can practice using the software and become proficient in handling day-to-day payroll tasks.

Smooth transition:

By comparing results from both systems, employers can more confidently move from the old system to the new one, making adjustments as necessary. This phased approach minimises risks and helps ensure a smoother migration.

Audit trail:

Running parallel pay runs creates a clear audit trail of all payroll transactions and calculations during the transition period. This reporting can be valuable for compliance purposes and future reference.

Data validation and historical records:

Comparing historical payroll data between the old and new systems allows employers and payroll teams to verify that historical records have been accurately transferred. This is essential for auditing, reporting, and record-keeping purposes.

A good example of the timeline for the running of parallel payrolls is: 

Beginning of July: Provision of FPS or P11 data to be provided for April to June

End of July: Run a parallel pay run in July

End August: Go live and first payroll run on new system

What is best practice for changing  payroll systems in the middle of the tax year? 

Parallel Payroll Runs:

Running a parallel pay run between the old and new systems for at least one full payroll cycle can help identify discrepancies and ensure a smooth transition.


Making sure that the changeover to a new payroll solution is communicated effectively to employees is vitally important. Benefits of the new system should be highlighted to get more buy-in and the employees should understand that rigorous testing will take place before the business moves over to the new payroll system. 

Dedicated Support:

Ensure that dedicated support is available from the new payroll system provider during the transition phase to address any issues promptly.

Contingency Plan:

The new supplier should have a contingency plan to address unexpected challenges and ensure payroll continuity.

If you found this useful, check out some of our other articles:

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