Payroll Data Migration Guide for Kiwi Businesses

Let's face it—switching payroll systems isn't exactly at the top of anyone's fun list. But for many Kiwi businesses, it's a necessary step that affects everything from keeping the tax department happy to ensuring your team gets paid correctly each week. Here in New Zealand, we have unique challenges thanks to the Privacy Act 2020 and our sometimes head-scratching Holidays Act 2003.

We've been helping local businesses manage their payroll since 2004, and in that time, we've guided thousands of companies through the migration maze. We've learned that successful moves don't just happen by luck – they need careful planning, thorough checking, and a bit of Kiwi ingenuity. This guide will walk you through how to make your payroll migration as smooth as possible, without the drama that often comes with big system changes.

One tricky bit is figuring out what to do with all your old payroll records. According to Employment New Zealand, you must hold payroll records for seven years, even for staff who've moved on. That's a lot of data to think about during your migration!

You'll need to decide what to move across. Current employee information, recent history, and configuration settings usually need to come with you. But for older records of people who've left or historical reporting data, you might be better off keeping them in a secure archive that you can access if needed, rather than cluttering up your new system.

Getting your payroll migration sorted means thoroughly checking your data at each step. You'll need to focus on three main areas.

First, structural checks confirm that your data fields map correctly between systems. This addresses any formatting differences, data types that don't quite match, and required fields that aren't left empty.

Content validation is about making sure the actual information is spot on—employee details, tax settings, and leave balances all need to be transferred correctly.

Compliance checking ensures your migrated data meets all our Kiwi regulatory requirements, particularly around IRD reporting, KiwiSaver contributions, and the ever-challenging Holidays Act compliance. Correctly calculating leave during migration can be particularly tricky, especially when you need to understand concepts like leave in weeks rather than hours to stay compliant with legislation.

Here at Smartly, our automated calculations are designed to keep you on the right side of New Zealand laws, which helps relieve some of the stress of migration. Our system has built-in checks that catch potential issues before they cause problems with your team's pay or compliance reporting.

The Ministry of Business, Innovation & Employment (MBIE) provides some handy resources for understanding the Holidays Act requirements during system transitions, which is worth incorporating into your checking process.

The gold standard for ensuring that your migration has worked is to run both systems side by side for at least one full pay cycle and compare the results. This parallel testing should cover all sorts of scenarios, including regular salary payments, staff on variable hours, and those with complex arrangements like allowances or special deductions.

This testing phase is your safety net, letting you spot and fix any issues before they affect your team. It builds confidence in the new system and provides solid evidence that your migration has maintained accuracy down to the last dollar.

Having a formal sign-off process adds accountability to your validation efforts. This means having verification checkpoints with the right stakeholders, documenting successful test cases, and creating a clear trail of all your validation activities. Each step should have someone responsible for it and clear success criteria so nothing gets missed as you transition.

Even with careful planning and thorough testing, sometimes things just don't go as planned. Setting up robust rollback procedures gives you insurance against critical failures. This means creating complete system backups at important migration stages and keeping your old system running until you're sure the new one is stable.

The Business.govt.nz website has some valuable guidance on data protection practices that should be part of your migration strategy, including backup protocols and security measures.

Clear communication with your staff is essential for a smooth transition. Develop a communication timeline that includes announcements 4-6 weeks before the change, regular updates during testing, and confirmation when everything's complete.

Your communications should reassure your team that they'll still get paid on time, explain what will and won't change from their perspective, and give them clear ways to ask questions if they're concerned about anything. Avoiding common payroll mistakes during this transition phase is critical - even small errors can cause big headaches and undermine confidence in the new system.

Our Kiwi-based support team (rated highest among NZ payroll providers) is here to help throughout your migration process. We're available from 8am to 6pm, Monday through Friday, to answer questions and provide guidance – no offshore call centres here, just local experts who understand NZ payroll inside and out.

Once your migration is done, you'll need to verify that everything is working as it should to stay compliant with New Zealand regulations. This includes reviewing your tax filing to check tax calculations for each employee code and confirm proper handling of part-year tax calculations.

Holiday pay verification should validate leave accrual rates against employment agreements and test complex scenarios like casual employees with variable hours. KiwiSaver compliance checks ensure the right contribution rates for all employees and verify the accurate handling of employer contributions and ESCT calculations.

The Inland Revenue Department provides detailed guidance on payroll calculations and tax obligations that you should reference during compliance testing.

Modern payroll migrations need to address how your payroll connects with other business systems. This includes links to accounting platforms, time and attendance systems, and document management tools. Getting data flowing smoothly between these systems is key to keeping your operations efficient and your reporting accurate.

Smartly connects seamlessly with popular accounting platforms, especially Xero, making transferring data between your payroll and accounting systems easy. For construction businesses, our partnership with job management software Fergus simplifies payroll by allowing timesheet imports directly into Smartly. This eliminates double-handling and reduces the chance of errors creeping in.

Data security needs to be front and centre throughout your migration. The Privacy Commissioner of New Zealand recommends implementing strong security measures to prevent unauthorised access, use, or disclosure of personal information. This includes encryption for data being transferred, access controls to limit exposure, and comprehensive audit trails to track how data is handled.

A successful migration allows you to optimise how you handle payroll. Document standard procedures for everyday tasks, implement data governance practices, and review how your systems work together to improve data flow. Regular checks, including quarterly payroll reviews and looking at exception reports, help maintain data quality and compliance with changing regulations.

Business.govt.nz notes that using the right technology tools can significantly improve your business processes after migration. Training your team on the new system's capabilities and creating resources they can refer back to ensures you benefit most from your new platform. Once your migration is complete, consider implementing time-saving payroll automation features to further streamline your processes and reduce manual work.

The payroll migrations that go the smoothest share a few key elements: thorough planning that covers all aspects of the move, robust testing through multiple stages, clear communication with everyone involved, and solid support after the migration. By applying these best practices, you can turn your payroll data migration from a daunting task into a strategic win for your business.

Ready to sort your payroll migration? Download our free Payroll Migration Planning Checklist to make sure you've covered all the bases for a successful transition.