Work, as economics gurus love to say, is becoming more flexible. But, so far, payday hasn't. Most people still get paid every two weeks, and the payroll industry is dominated by legacy companies like Automatic Data Processing, or ADP, which was founded in 1949.
Yesterday, Square, the folks who brought credit card payments to flea markets and food trucks, unveiled another product targeted at small businesses — and this one could help bring payday into the 21st century. Square Payroll will allow businesses to track taxes and pay employees with just a few clicks, seamlessly incorporating timesheets into the existing payment system.
The new product, for now only available in California, offers plenty of perks for harried small business owners, such as integrated payroll taxes and automated overtime calculations. Taking some of the hassle out of managing a small business could be, for lots of Square users, well worth the $20 per month (plus $5 per employee) fee.
There are also some benefits for employees. While Square Payroll can be used for salaried employees, the focus is on low-wage hourly workers, for whom cash flow can be a problem. These workers are often the folks who end up taking predatory payday loans. But Square enables employers to put paychecks out as frequently as once a week, thereby making their employers' financial lives less precarious.
Other startups are also interested in solving the pay lag problem; Activehours, for example, has an app that allows some wage workers to get paid out based on hours worked every day. Square's other competitors in digital payroll for small businesses include Intuit's Quick Books, Zen Payroll, and ADP, the longstanding market leader.
Payroll is just the latest example in Square's pussh to become a streamlined, analytics-rich, all-in-one system for small businesses.The company's new Customer Insights product, for example, allows business owners to easily track what customers buy and how often they come back, as well as other trends in sales over time. With Payroll, Square could easily tie labor cost data into that system. Already, small business owners are able to see when overtime might hit or certain benefits might kick in and make the necessary staffing decisions to save costs. By incorporating Payroll data into that system, managers might also be able to consider who's on the clock to how much money is coming in. What this increasingly data-rich workplace might look like for the people being processed via Square Payroll remains to be seen.
Square Payroll does have the capacity to save headaches up front, but it's important to remember that labor is a major cost for small business owners, one they're constantly trying to cut down on. Square, with its much-touted commitment to helping its customers "unlock the value of every sale," benefits from helping them find ways to save.