Add Independent Contractors to Square Payroll
See additional Square Payroll Contractor FAQs.
Create a New Contractor
Visit the Payroll Team tab of your online Payroll dashboard or the Square Team App.
Select Add Team Member.
Select Create New or select an existing team member.
Enter your contractor’s First and Last name.
Provide the contractor’s email address. By providing an email address, your contractor will be given an online account instructing them to provide the remainder of their personal information and bank account details if they are paid by direct deposit. The contractor can set up their online account through a web browser or through the Square Team App on their smartphone. If you do not provide the contractor with an online account, you will need to enter their personal information before you are able to pay them.
Select the Contractor employment type. Note: If the team member is also classified as a W-2 employee, additionally select the Employee type. Learn how to Add Employees to Square Payroll.
Select the Pay Type and Payment Method. For contractors who only earn commissions, choose Hourly and enter a rate of $0. You can turn on Commission Tracking to have Square automatically calculate these. Alternatively, you can manually enter the commission amounts when running payroll.
If applicable, enter the contractor’s personal information and bank account information.
Select Generate Point of Sale Passcode if you would like to use Timecards through Square Payroll.
After you select Save, your contractor will appear as an option when sending a contractor payment.
Note: You cannot pay your contractor until their personal information has been entered. You can either provide their email address so the contractor can enter in their personal information or you can manually provide this information yourself. To enter this information yourself, click on the contractor’s name in the Payroll Team tab of your Payroll dashboard > Activate Manually.
Square Payroll does not currently support filing Form 1099-NEC for contractors that are businesses and use their EIN (not their SSN) for their taxpayer identification number.
Transferring Historical Contractor Payment Information
You are responsible for transferring any historical payments you made to contractors this year prior to Square Payroll. Follow these steps to add the total year-to-date contractor compensation to Square Payroll and ensure the compensation will be correct at the end of the year on Form 1099-NEC:
To transfer historical payments for the current year, go to the Overview section of your online Payroll Dashboard or the Run Payroll screen on the Square Team App and select Pay Contractors.
Select the payment method Pay All Contractors by Check. Note: Selecting this option will ensure the contractor is not paid an additional time and the amount is only recorded in Square Payroll for tax reporting purposes.
Select the pay period and the appropriate contractor(s) you wish to capture a payment for.
Enter the total amount you have paid the contractor outside of Square Payroll in the Amount column, or enter the total number of hours and hourly rate they have been paid.
Review and select Confirm.
Note: Please ensure that the prior payment history for your contractors is captured within Square Payroll before the end of the year for accurate tax filings. The payment will be reported on the current year’s Form 1099-NEC. You cannot add payments for previous years.
Learn more about transferring prior payroll history from a previous payroll provider.
Add a Previously Created Employee as a Contractor
Square Payroll allows your team members to be classified as both a W-2 employee and a 1099 contractor. If you would like to switch the team member’s employment type, click the applicable box on the Team Member’s payroll profile in the Payroll Team tab in your online Payroll dashboard or the Square Team App.
Not sure if you have an employee who should receive a Form W-2 or an independent contractor who should receive Form 1099-NEC? Read The Bottom Line's post on 1099 vs. W-2 to learn more.
Reactivate a Contractor in Square Payroll
To reactivate an individual who has been removed from Square Payroll:
Go to Payroll Team in the Payroll section of your online Square Dashboard.
Select the individual you would like to add back to Square Payroll. Their status should be listed as Inactive.
Check the Employee and/or Contractor Employment Type box. Note: The individual’s payment method will default to the previous payment method. Team members who previously had an online account enabled will have their account reactivated with the same email address.