Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).

RLMadeby — Tue, 05 May 2026 18:58:56 GMT

I'd like to take a W2 employee, currently paid through Payroll, that we are switching to Contractor status.

I have switched their Employment status to Contractor already as of 4/22/2026. But I do not want to pay them through Square Payroll.

How do I take them off Square Payroll without deactivating them?

I will pay these Contractors manually.

Re: Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).

TheRealChipA — Wed, 06 May 2026 12:14:59 GMT

Hey there @RLMadeby.. I was pretty sure I knew the answer to this, but I confirmed my thoughts with ManagerBot by asking it "can I exclude team members, specifically contractors, from payroll runs?" It's answer (confirming mine) was;

Contractors are automatically excluded from regular payroll runs. They're paid separately via 1099 forms rather than W-2 payroll. You'll need to pay contractors outside the standard payroll cycle — typically by check, bank transfer, or other payment method — and Square tracks these payments for 1099 reporting at year-end.

If you need to exclude specific W-2 employees from a payroll run, you can skip them when reviewing that pay period before finalizing. Each payroll run shows all eligible employees, and you can deselect individuals before processing.

I also asked ManagerBot for the appropriate Square documentation. It would be wise for you to read through this one especially.

That being said, it would be remiss of me not to mention this since this topic gets many business owners in trouble. In many states switching a team member from W-2 employee to contractor raises immediate red flags. This is because some employers do this to solely to avoid paying employer payroll taxes. There are clear rules and guidelines to help determine who is and is not a contractor. You may have already done this and, if so, pardon my unwanted advice. But, for each employee you are doing this for, I would make sure I have my documentation in order. There is a federal checklist for doing this and having this on file would help if you were to be audited. All it takes is answering "no" to just one question to make a team member ineligible for contractor classification, and the fines and penalties are nothing to laugh at.

Re: Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).

RLMadeby — Sat, 09 May 2026 00:49:26 GMT

Thank you Chip, This is very helpful.

thread Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll). in Staff & Payroll

Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).

Re: Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).

Re: Switched a W2 employee to Contractor and want to pay manually (not through Square Payroll).