Square’s optimized payroll service known as Square Payroll is going places. The company has launched the service in five more states in the U.S. and targets broader expansion in the future. Square Payroll service is designed for small business environments and helps with processing employee payments and filing of taxes at both state and federal levels.

It costs a business $20 a month to use Square Payroll and an extra $5 per employee paid through the system. Square touts its service as offering simplified and optimized payroll support. The new locations that Square Payroll is expanding in are New Hampshire, Alaska, Tennessee, Nevada and South Dakota.

High retention rate

Square’s payroll service is already used by small businesses in California, Florida and Texas. According to the company, 90% of vendors who signed up to use Square Payroll to process employee payments have stuck with it since launch.

Calculating employee hours

Using Square Payroll, a business can easily and quickly calculate hours worked by its employees for purposes of payment and taxes. The Square payroll app also allows employees to set up their tax details. Additionally, a business that uses Square Payroll benefits from having its taxes filed automatically.

Initial adoption of Square’s payroll services is among business with hourly employees. However, the service can also be used for processing payments for salaried workers.

Opportunity to upsell existing Square Payroll installed base

Besides the direct sales that come from the $20 a month subscription fee and $5 per employee payment processing fee, Square also uses the payroll service to drive interest in its other offerings. The company says that 15% of customers using Square Payroll have not signed up for its credit card payment processing service. As such, the company has the opportunity to upsell those customers to fuel revenue growth within its existing installed base.

Competition

Nevertheless, Square also has to contend with fierce competition in the payroll processing market. The company battles for the attention of small businesses against Intuit Inc. (NASDAQ:INTU) and Automatic Data Processing (NASDAQ:ADP), which have their own advantages in the space.