Square Payroll – Review 2020

Best known for its payment-processing tools, Square has been offering an online payroll service since 2015. It’s added some features and functionality since we last reviewed it, including an EIN Assistant, the ability to record both sick pay and PTO, and employee access to data entry in their profiles. Square Payroll is easy enough to use, and every major element of payroll administration is supported, from setup to pay runs to taxes to reports. However, this young service lacks the depth and customizability of its competition. Its reports are on the skimpy side, and it comes with only a handful of earnings types. Square Payroll has a long way to go to compete with our Editors’ Choices, Gusto and OnPay, which excel in every element of payroll and HR and offer superior usability.

Square Payroll Pricing and Plans

The base price for paying W-2 employees and contractors with Square is $29 per month, with a $5 per worker charge per month. This means it’s one of the more-economical options out there. Only Patriot Software’s Basic plan ($10 per month plus $4 per employee per month) is less expensive, and that requires you to submit your own payroll taxes. On the other end of the spectrum, if you choose QuickBooks Payroll Elite, you’ll pay $125 per month plus $10 per employee per month.  

Square Payroll offers a contractor-only option that costs $5 per contractor per month. No subscription fee is charged for months in which you don’t pay anyone, which has become a fairly standard practice. It could be a good service for startups that don’t have—or plan to have—very many employees. It’s also a good option for those who use Square’s other integrated apps such as Appointments, Payments, Point of Sale, or the new Invoices product.

A New Way to Get Started With Square Payroll

Many other small business applications, even financial ones, don’t require you to designate options for absolutely every setting before you start getting some work done. For example, you can start sending invoices with accounting software before you enter your entire customer database. You can add your customers on the fly.

Payroll websites aren’t like that. Though you can certainly add employees as you hire them and benefits as you take them on board, you can’t do your first run until you’ve completed comprehensive employee records and added all information required about the benefits you offer your staff. QuickBooks Payroll is the exception here.

Square Payroll used to have a comprehensive wizard that walked you through all the steps required in setting up for a first payroll run. That helpful feature is gone, replaced with a brief four-step process that asks for contact details and the size of your staff. Once you’ve completed that, the site’s main user interface opens, displaying three of the steps required for setup: employee records, a linked bank account, and tax information.

An Onerous Task

First up: Creating employee records, which in Square Payroll includes providing information about benefits within each worker record. This is a labor- and time-intensive job. You can save a lot of time, though, by inviting employees to enter a good deal of their own information, such as contact details, date of birth, Social Security number, filing status, and number of allowances designated on the W-4 form. Competitors also allow this hybrid data entry process.

You as the proprietor still have to supply a lot of information in employee records, including whether the employee is hourly or salaried, what his or her pay rate is, whether a paper paycheck or direct deposit has been requested, and so on. If you’re using Square Point of Sale and plan to import Timecards from there, you have to assign a passcode to the employee. Where some other sites have you enter information about benefits and sick leave/PTO accrual policies on separate screens, you do that work within the employee records in Square Payroll.

If you’re a young company or you’re just starting to offer benefits, you have two options: You can take advantage of the partnerships that Square Payroll has with third-party benefits administrators for things like health insurance and retirement plans. Or you can bring your own and enter these deductions on the site so that they’re incorporated into the payroll process.

To add a benefit such as health insurance, you open an employee record and click Add Benefit and then Create New. Enter the name you’d like to appear on paystubs, like Health Insurance or 401(k), and then select the benefit type from the drop-down list. You can choose to have a percentage of a worker’s pay or a flat amount deducted. If there’s an annual limit, you enter that. Company contributions are handled similarly. The new benefit then appears as an option in every employee’s records. Square Payroll offers the most common deduction types, but it’s not as flexible as OnPay, for example.

Will your staff members be able to earn Paid Time Off (PTO) or sick leave? Square Payroll now supports both. It helps you create policies to track these and does the ongoing calculations in the background. You have to specify how many hours employees need to work before they’re eligible. The site also supports garnishments and other post-tax deductions.

More Steps

Before you can run a payroll, you’ll need to enter payroll tax information for your state (all 50 are now supported, and the site provides current tax tables). This includes state withholding and UI account numbers and state UI tax rates. If you don’t have an Employer Identification Number (EIN), a new tool in Square Payroll guides you through the process of acquiring one. 

You’ll have to do a few more housekeeping tasks, such as linking Square Payroll to your bank account so that it can withdraw funds for taxes and direct deposits. This process can take a few days, because Square has to make two very small deposits into your account to verify the connection. Alternatively, you can use Plaid—a service that instantly authenticates accounts and integrates with Square. This lets you run a payroll the same day you sign up. Same-day payroll is an excellent feature that some competitors have added, too.

If you’ve already been paying employees or contractors, you’ll need to enter your payroll history—quite a burdensome task. Square Payroll simplifies it by providing step-by-step instructions for downloading records from providers like Intuit and Paychex. Like its competitors, Square has onboarding specialists at your disposal who can help with this and other setup chores.

The Square Payroll User Experience

Square Payroll’s user experience is not as sleek, professional, and state-of-the-art as the competition’s. The site displays all employee data fields on one long screen that requires a lot of scrolling. Competitors like SurePayroll separate related information and display it on individual screens that are accessible by clicking tabs. This eases the initial creation of the records as well as subsequent retrieval and edits.

That’s not the site’s only quirk. When you sign in, you see a Dashboard that incorporates links to other Square products and services. You have to click the Payroll icon to get to Square Payroll’s dashboard, which isn’t nearly as comprehensive as OnPay’s, for example. It displays a three-month line graph illustrating total labor costs and links to and totals for recent payrolls. An alert about the upcoming payroll is in the upper right, along with two links: Pay Employees and Pay Contractors, which you click at payroll time.

On the whole, the site is very sparse, with few navigation links; in fact, there simply isn’t much navigation at all, except for Continue buttons during payroll runs. The main menu contains links to the site’s sections: Overview (dashboard), History & Reports, Payroll Team (employee list and records), Benefits (such as third parties who can help set up health insurance plans), Tax Forms (filed payroll tax forms), and Settings. The last doesn’t include much, owing to the simplicity of the site. 

Oddly, there’s no link in the toolbar for running a payroll; you have to click the link on the Overview. You’ll use the main menu almost exclusively for navigation, though when you’re on an internal working screen you’ll sometimes have to click an X in the upper-left corner to close it and return to the main menu.

Running Payroll, Getting Help

Once you’ve completed the setup process and verified your bank account, you’re ready to pay employees. On the home screen, you click Pay Employees, which launches a wizard. You’re given three options: run a regular payroll, run an off-cycle payment, or generate COVID-19 Emergency Leave Pay (the latter takes you off to a special wizard designed for this purpose). 

The next screen displays all employees in a table, along with their pay rates. Here you enter the number of hours worked in the correct columns: Regular, Overtime (1.5x Regular), Double (2x Regular), Additional, Paycheck Tips, Cash Tips, and PTO Hours (you can turn most of these off if they’re not needed). The Additional option is for commissions, bonuses, and so on, but the label just says Additional, and you can’t edit it to be more specific, though you can add a Memo by clicking the three dots at the end of each row. There’s also a link for importing timecards from Square Point of Sale.

The site calculates each worker’s Gross Pay and deposits it in the final column. Clicking Continue takes you to the Adjustments page, where you’ll again see the table of staff members. Columns here display withholding amounts for taxes, benefit deductions and company contributions, post-tax deductions (new), reimbursements, and net pay. I clicked on an employee’s name to check something on her record. The record opened, but when I closed it, I was taken back to the employee list, not the payroll screen where I was working. I made my way back and didn’t lose any data I’d entered, but other sites provide a way for you to check an employee record without losing your place.

The next screen, Confirm Withdrawal, is sufficient, considering the site’s feature set. It summarizes the run you’re about to approve and tells you exactly how much money will be withdrawn from your bank account. Totals for all pay types, employer taxes (Square Payroll handles all tax payments and filings), and company contributions appear at the top-left side of the page. The Withdrawal Summary to the right breaks payroll down into scheduled debits and payments you’ll need to handle. You can also see a preview of individual paystubs by clicking a link.

Click Confirm Withdrawal, and your run is complete (though you can cancel it up until 7 p.m. Pacific Time the day before payday). Links on the following page let you print checks, download paystubs, and export the run to CSV format. If you have trouble running your payroll (or completing any other tasks), you can contact Square support by phone, email, or Twitter; alternatively, you can browse online help and the user community. The site’s online help is not nearly as comprehensive as that of some competitors, including SurePayroll, and more context-sensitive help would be very welcome.

To pay contractors, you click the link for that on the Overview page and follow the wizard’s steps; it’s of course a simpler, shorter process.

Reports, Mobile, and More

If you’re looking for a service that offers lots of preformatted reports, you’ll find sites like Gusto far more accommodating than Square Payroll, which offers only a custom report option. You can’t view the reports on the site, but you can download them. You can export Paycheck Details, Employee Totals, or Company Totals in .xlsx format and Paystubs in .pdf format. New this year is the critical Paycheck Protection Program (PPP) report, which downloads in .xlsx format. The reports I looked at loaded very quickly and displayed well in Excel.

Square Payroll was able to create PPP reports for businesses affected by COVID-19 easily because the site already had the historical payroll data needed and could pre-fill the loan applications. Thanks to its partnership with an industrial bank, Square Capital became an approved SBA lender for the PPP and was able to procure capital for businesses that are often overlooked or underserved by traditional banks.

Another related service is the Cash App, available for iOS and Android mobile devices. It’s a peer-to-peer payment service similar to Venmo and others. Users receive routing and account numbers (and a free linked debit card), so Square Payroll employers can send their pay directly to Cash App accounts. This gets the paycheck funds there a day early. 

Square also integrates with QuickBooks Online, and as you might expect, it’s well-integrated with other Square services.

Square Payroll offers mobile apps for both iOS and Android. Both work similarly to the browser-based interface in terms of both setup and operations, with a couple of exceptions. The Overview (Dashboard) is missing the labor costs graph and links to previous payrolls. Also, entries that appear in the left-side navigation menu of the desktop version are divided between a drop-down menu accessible from an icon in the upper left and four navigation icons that run along the bottom: Overview, Team, Timecards, and Reports (payroll history only, not the custom reports on the website). I was able to access employee and contractor records in the app and run a payroll easily.

Better for Beginnerswork

Square Payroll might be a good choice for businesses already using Square Point of Sale, since you can import employee timecards from it into the payroll site. It also distinguishes itself from the competition by offering a contractor-only option. This provides an easy upward path for a young business that is only using independent contractors from the start. Hourly offers something similar, as does Gusto.

In fact, we’d really only recommend Square Payroll for a very small business with few employees or one that only employs contractors. The service is fairly easy to use, but a company with any complexity will find needed features missing, such as customizable earnings types and more reports. At this point, it can’t compete with Gusto or OnPay, our Editors’ Choices. Gusto combines an exceptional user experience with the features many small businesses would be most likely to use. OnPay supports multiple vertical industries well, and its overall competence and versatility make it a good choice for more generic small businesses, too. Square Payroll definitely shows promise, but it has a ways to go in terms of reporting, customizability, and the depth of its offering.

While you’re in the money mindset, check out our roundups of the best online accounting services and tax software.

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Further Reading