How To Use Square Payroll In 7 Steps

Square Payroll is full-service payroll software for small businesses, especially businesses already using Square POS, Square Team Management, timecards, or tips. It can help employers pay employees and contractors, calculate payroll taxes, file payroll tax forms, and manage payroll records.

This guide explains how to run employee payroll and contractor payments in Square Payroll, plus what to review before submitting a pay run.

What Is Square Payroll

Square Payroll is a full-service payroll solution built for small businesses, especially those already using Square’s POS, time tracking, team management, or payments tools. It includes core payroll features such as employee and contractor payments, payroll tax support, direct deposit, timecard imports, and payroll reports.

Square Payroll also offers benefits options through partner providers and connects closely with the broader Square ecosystem. For businesses already using Square POS or Square Team tools, that integration is often the biggest draw because employee hours, tips, and timecards can flow directly into payroll.

How To Run Square Payroll For Employee Payments

Before running payroll in Square Payroll, make sure your business, employees, contractors, tax information, pay schedule, and bank account are set up. Once your account is ready, running payroll mainly involves reviewing the pay period, entering or importing hours, adding earnings and deductions, and submitting payroll.

1. Start A Payroll Run

Sign in to your Square Dashboard and start a payroll run from the Payroll section. Square’s current support instructions direct users to go to Staff > Payroll > Run payroll, then choose Pay employees and start a regular payroll run.

If you use Square mobile payroll tools, the exact app workflow may vary, but the same general process applies: choose the correct payroll run, review the pay period, and confirm payroll details before submitting.

2. Confirm The Pay Period & Pay Date

Review the pay period, pay date, and payroll deadline before continuing. This helps ensure employees are paid on time and gives you a chance to catch schedule errors before payroll is processed.

Square may offer different payment timing options depending on your account settings and eligibility. For example, two-day payroll may be available if approved, and faster payment options may be available through Square Balance or Square Checking.

3. Choose Employee Payment Methods

Review how each employee will be paid. Square Payroll may support payment by direct deposit, check, or other eligible payment methods, depending on your setup.

Employees may be able to enter their own direct deposit and personal information through Square’s team member onboarding tools. Employers can also enter employee information manually if needed.

4. Import Or Enter Employee Hours

If you use Square Timecards, Square Team App, or Square POS, you may be able to import employee hours, timecards, and tips into Square Payroll. This can reduce manual entry and help keep payroll connected to your day-to-day operations.

If you don’t use Square time tracking tools, you can enter employee hours manually. Review regular hours, overtime, pay rates, and any imported time data before moving forward.

5. Add Extra Earnings

Add any extra earnings that apply to the payroll period. These may include overtime, tips, bonuses, commissions, reimbursements, PTO, sick pay, or other pay types.

Overtime rules can vary by federal, state, and local law, so confirm the correct overtime rate before submitting payroll. If your business uses Square tips or time tracking tools, some information may import automatically, but you should still review it for accuracy.

6. Make Deductions & Adjustments

Review payroll adjustments before submitting. These may include benefits deductions, wage garnishments, post-tax deductions, reimbursements, or other payroll adjustments.

Make sure deductions and adjustments are assigned to the correct employees and calculated correctly for the pay period.

7. Review & Submit Payroll

Before submitting payroll, review the payroll summary carefully. Confirm employee hours, gross pay, deductions, taxes, net pay, payment methods, pay date, and the total amount that will be withdrawn from your business account.

Submit payroll only after you’ve confirmed the totals and deadlines. If you need to cancel or edit a payroll run after submission, check Square’s current cancellation rules and deadlines, since timing may vary by payroll schedule and payment method.

How To Run Square Payroll For Contractor Payments

Paying contractors through Square Payroll is separate from running employee payroll. Before you start, make sure each contractor has been added to Square Payroll with the correct personal, tax, and payment information.

1. Start A Contractor Payment Run

From Square Payroll, choose the option to pay contractors. Contractor payments are handled separately from employee payroll, so make sure you select the correct payment type before continuing.

2. Choose The Pay Period Dates

Input your chosen pay period dates. Be aware that if you choose a payment date from the previous year, the payment will still appear on the contractor’s 1099-NEC for the current year.

In many states, contractors are not covered under payday laws, so you can pay contractors according to their preferred schedule or whatever pay cadence you previously agreed on.

3. Choose The Contractor Payment Method

Select how each contractor will be paid. Depending on your Square Payroll setup, contractor payment options may include direct deposit, check, or other eligible payment methods.

You can also use check payment options to record contractor payments made outside Square Payroll.

4. Enter Or Import Contractor Payment Details

Enter the payment amount for each contractor you’re paying. If your setup supports it, you may also be able to import contractor hours, time, or wage data from Square time tracking tools or supported integrations.

Review all contractor payment amounts before continuing.

5. Review & Submit Contractor Payments

Before submitting, review the contractor payment summary. Confirm the contractors being paid, pay period dates, payment methods, amounts, and any records needed for 1099 reporting.

Submit the payment only after everything is accurate. Payment timing depends on the payment method and your Square Payroll settings.

The Bottom Line On Using Square Payroll

Square Payroll is a strong option for small businesses that want full-service payroll, payroll tax support, and multiple ways to pay employees and contractors.

It’s especially useful for businesses already using Square POS, Square Team Management, Square timecards, or Square payments. When your payroll tools connect with your sales, tips, time tracking, and employee management tools, running payroll can require less manual data entry.

Square Payroll may not be the best fit for businesses that need advanced HR tools or deep payroll customization. But for Square-based businesses that want straightforward payroll connected to the rest of their operations, it’s a solid choice.