Square Testing New Payroll Product as Ambition Grows

Square is running a pilot test for a new payroll product as the company continues to expand its offerings to complement its main payments business.

The new payroll product, spotted by a tipster, is designed to handle employee payments and related tax filings for small- and medium-sized businesses. A limited number of California businesses are currently using the service, which costs $10 per employee per month, as part of a private pilot test, according to pricing outlined on a page on Square’s site.

A Square spokeswoman confirmed the pilot test.

Square Payroll is the latest in a string of new paid products being rolled out by Jack Dorsey’s company that fall outside of its main payment processing business. Over the past year, Square has unveiled a merchant cash advance offering, a customer feedback product and an invoicing service. It also acquired food delivery startup Caviar to give restaurant clients the option of adding an outsourced delivery service.

This product expansion is happening for two reasons. First, Dorsey has long said he wants the company to offer products that make running a business easier. While the company started with payment processing services and the credit card dongle that could be plugged into a smartphone, that was never Dorsey’s end goal. And for good reason: Pricing is the name of the game in payment processing, and Amazon and PayPal, for example, both typically charge less than Square does. If Square provides a business with other useful products, the thinking goes, the company has a better chance of keeping that business as a customer over the long run. This is even more crucial since Square Wallet didn’t take off as the differentiator Square hoped it would become.

Secondly, these non-payments products should be more profitable than Square’s regular payments business, where Square typically only keeps around one third of the transaction fee it charges merchants. To live up to its hype — which now includes a $6 billion valuation — Square likely needs to prove that it can expand its profit margins. Success with some of these new products will help it get there. Square doesn’t need to hit a home run with everyone of these new products, but it will need some of them to take off. Square Payroll looks to be its next shot.

This article originally appeared on Recode.net.

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