Add Existing Employee Benefits
With Square’s online payroll services, you’re able to easily set up taxable benefit deductions and contributions for your employees.
How it Works
When you create a benefit, you’ll choose the benefit category, specify a benefit name to be reported on the employees’ paystubs, and set a deduction amount to be withheld from your employee’s paycheck. When you run payroll, we will automatically calculate the benefit deductions and contributions and leave the amounts in your bank account for you to distribute to the applicable benefit providers. Based on the benefit category you selected, we will determine the taxability and reporting requirements for each benefit to ensure your taxes and tax forms are accurate.
Note: Benefits are only available for W-2 employees at this time.
Create a Benefit
Benefits are initially created from an employee profile and can then be assigned to other employees who will be receiving the same benefit.
To create your first benefit:
Go to Staff > Team on your online Square Dashboard.
Select an employee who will have a benefit.
Click Add Benefit. If you’re creating a benefit for the first time, click Create New.
Enter a plan name as you’d like it to appear in your employee’s paystubs. For example, Health Insurance or 401(k). Note: The benefit name can’t be edited retroactively.
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Click Select > choose which type of benefit you’d like to enable for this employee.
Note: It’s very important that the benefit type is correct, since this determines how your employee’s deductions and employer contributions are taxed and reported on tax forms like Form W-2.
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Specify the details for your employee’s deductions. This information has been provided to you by your benefit provider, so you should reach out to them with any questions.
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Calculation Method: Enter the amount or percentage to be deducted per pay period or per month.
If you choose to deduct a percent of the employee’s paycheck, the amount will be calculated from the employee’s gross pay before taxes.
If you choose to deduct a fixed amount per month, we will determine the amount to be deducted each paycheck based on your payroll schedule. If you pay your employees weekly, we will divide the amount by four. If you pay your employees every other week, we will divide the amount by two. In months with extra paychecks (months that have five pay dates for a weekly payroll schedule or 3 pay dates for a semi weekly payroll schedule), we will not make any deductions in the last paycheck of the month.
Deduction to date: If you’re switching payroll providers, it’s important that you provide the correct deducted-to-date amount for each employee.
Deduction limit: Enter the annual limit for the total amount that can be deducted for this employee, if applicable.
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Specify the details for your company’s contributions towards this benefit.
Calculation Method: Enter the amount or percentage to be deducted per pay period or per month, if applicable.
Contributions to Date: Total amount the employer has contributed to this employee’s benefit to date, if applicable.
Contribution Limit: The annual limit for the total amount the employer can contribute for this employee.
Click Save.
Once you’ve created a benefit for one employee, you’ll be able to apply this benefit to the rest of your employees from their individual profiles.
Note: If you’re adding an employee in the middle of the month, make sure you adjust the deduction/contribution amounts to ensure the right amount is withheld for the full month.
Deactivate a Benefit
Go to Staff > Team on your online Square Dashboard.
Select an employee with the benefit you’d like to deactivate.
Select the benefit > click Deactivate.
Click Confirm Deactivation.
Note: Benefits will automatically become inactive if a $0 limit is set or the year-to-date deductions exceed the limit.
Run Payroll Using Benefits
To run payroll with active benefits:
Log in to the Payroll section of your online Square Dashboard or the Square Team App > Pay Employees > Run Payroll or Off-Cycle Payment as usual.
After entering employee hours and any additional pay, click Continue. The following screen details the Adjustments to each employee’s pay, including benefit deductions and contributions. To edit the deduction or contribution, click the blue dollar amount > edit the contribution amounts > click Update.
Note: For employers with benefits that are set to deduct a fixed amount per month and set weekly or biweekly payroll schedules, not all months have the same number of weeks/paychecks. For example, if you pay your employees weekly, 8 months will have 4 paychecks and 4 months will have 5 paychecks. Square Payroll will not include any deductions or contributions in the last paycheck for months that have extra paychecks.
Sending an Off-Cycle Payment with Benefits
To send an off-cycle payment to an employee with benefits:
Log in to the Payroll section of your online Square Dashboard > Pay Employees > New Off-Cycle Payment.
After entering employee hours and any additional pay, click Continue. The following screen details the adjustments to each employee’s pay, including benefit deductions and contributions. To edit the deduction or contribution, click the blue dollar amount > edit the contribution amounts > click Update.
Note: Benefit amounts will not be automatically calculated if the benefit calculation method is set to a fixed amount per month.
Supported Employer-Sponsored Benefit Types
Health Savings Account (HSA)
Health Insurance (Section 125 Plan)
Flexible Spending Account (FSA)
Dependent Care Flexible Spending Account (FSA)
Simple IRA
401K Retirement Plan
Roth 401K Retirement Plan
403B Retirement Plan
Roth 403B Retirement Plan
457(b) Deferred Compensation Plan
Roth 457B Deferred Compensation Plan
Roth IRA
Unsupported Benefit Types
Fringe benefits or other custom benefit types
Life, disability, and accident insurance
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
SEP IRA
Benefit deductions for 1099 Contractors