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 name to be reported on the employees’ paystubs, and set a deduction percentage or fixed 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.
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:
- Log in to the Payroll section of your online Square Dashboard.
- Click Employees > 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 pay stubs. For example, Health Insurance or 401(k). Note: The benefit name can’t be edited retroactively.
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.
- 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.
- Deduction per pay period: 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.
- 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.
- Specify the details for your company’s contributions towards this benefit.
- Company Contribution Per Pay Period: Enter the per-period amount or percentage to be contributed by you as the employer.
- Contributions to Date: Total amount the employer has contributed to this employee’s benefit to date.
- 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.
Deactivate a Benefit
- Sign in to the Employees section of 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 > Run Payroll 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 amount > edit the contribution amounts > click Update.
Note: For employers with fixed amount deductions/contributions and 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. If you want a specific amount to be deducted/contributed each month, you can edit the deductions/contributions for the final paycheck to be zero (0) in months that have 5 paychecks.
Supported 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
Unsupported Benefit Types
- Benefit deductions for 1099 Contractors
- Fringe benefits or other custom benefit types