Square expands its payroll service to Texas

Today, Square is rolling out its Payroll service to Texans, marking the first time the product has expanded outside of California.

Square first launched Payroll over the summer. The service handles all aspects of employee payment, with a focus on hourly employees, and charges a monthly fee of $20 plus $5 per employee. Payroll also accommodates salaried employees and automatically manages tax filings, sick and holiday leave, as well as workers’ compensation claims.

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Small business is big for Texas, so it’s not surprising that Square decided to take its payroll service there. In 2011, more than 4 million people in Texas, or nearly half of the state’s private workforce, worked for small businesses, according to the U.S. Small Business Administration.

This is the second service that Square has launched that isn’t tethered to its point-of-sale system. Small business owners can use its appointments service or payroll service even if they don’t process transactions using Square. The expansion of these paid services will be important for the company, especially as it approaches a public offering. In the early days, Square offered much of its software and hardware for free, relying on transaction fees from merchant sales to make money. But, because Square is predominantly a tool for small businesses, and transaction volume and purchase amounts tend to be low, the company needed to diversify the way it monetizes.

So it started building out paid tools like Appointments and Payroll. In order for the company to fully capitalize on Payroll, however, it will need to roll out the product more broadly. Texas is the first step in doing just that.