Square takes on payroll giant ADP with new service by Leena Rao @FortuneMagazine 11:15 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons As payments company Square evolves into a modern day bank for small and medium-sized businesses, the company is debuting the next financial service: payroll. In the past year, Square has focused on creating a new revenue stream, launching a number of paid features for merchants using its point of sale Register app, including invoicing, cash advances, appointment scheduling, marketing features, and analytics. Square says its payroll service is aimed at smaller businesses whose staff includes hourly employees—though the company says its product works with salaried workers as well. Employees clock in and out from the Square register app and their hours are automatically entered into the system. Employees can set up direct deposit and online pay stub access with payroll, and Square’s product will handle withholdings, payments, and filings. Pricing is $20 per month plus $5 per month employee paid. For now, Square Payroll is available for California businesses and will expand to new states soon. Square Payroll is built on the belief that existing systems from Paychex, Intuit, and ADP are too complex and don’t serve companies with fewer than 100 employees, and those who are paid hourly, efficiently or cost-effectively. Square isn’t the only technology company that wants to simplify payroll. ZenPayroll, a Silicon Valley upstart that just raised a boatload of cash from Google Capital, is also offering a similar product. ZenPayroll charges $25 per month plus $4 per employee per month. Square’s existing customer base will work in its favor as it already has millions of merchants who use its Register app. Square has successfully launched other new products to its customers including Square Capital, which offers cash advances to small businesses. Square says Capital has advanced more than $100 million to more than 20,000 businesses since it launched in 2014. Let’s see if it can do the same for Payroll.