Last year my firm, Cloudsourced Accounting (now part of HPC), spotted Square testing a beta version of their payroll product. At the time it was an invite-only beta. I'm happy to report that it's now available to all.

Benefits of Square Payroll

If you're using Square as your point of sale, you'll definitely want to consider Square Payroll. One really neat feature is that timecards are integrated into the payroll system. This means that when your employees clock in and out from the Square register, their time is automatically sent over to the payroll system for easy processing.

I also like that the pricing is easy to understand. Square Payroll starts at $20 + $5 per each active employee per month. This is in line with ZenPayroll's pricing which until now has been pretty much the only modern stand-alone payroll option in town.

Like ZenPayroll, Square Payroll promises to automatically process all federal and state payroll taxes and filings. When I'm recommending payroll systems to small businesses, this is almost always a top requirement. With manual payroll systems, it's all too easy to forget to file payroll taxes, which can result in hefty fines. Much better to have it done automatically for you.

Square also allows you to send a link to employees so they can fill in their own employee information. Employees can securely add in their direct deposit info and W-4 online. They can also log in to view pay stubs or update their employee information.

Limitations of Square Payroll

At the moment, Square Payroll is limited to businesses located in California. You'll need to make sure that all of your employees are living in California, as Square can't handle payments to other states. Given the high complexity of complying with various state payroll tax filing methods and rules, it may take a while before Square Payroll is available in your state.

Here's a big one: You can't pay employees who have pre-tax deductions, such as health insurance or 401k plans. If you have employees with pre-tax deductions or plan to offer benefits to your employees, you'll need to use another payroll system.

In Summary

It's exciting to see an innovative company such as Square enter the online payroll space. If you already use Square as your point of sale, are doing business exclusively in California, and don't offer benefits to your employees, Square Payroll could be a good fit. I can see this being a great option for small retail or hospitality businesses, which are already core customers of Square's payment processing tools.

Here's a video from Square introducing Square Payroll: