Venmo Payroll Risks: Why Businesses Should Switch to Thryv Workforce Center

In the fast-moving world of small business, efficiency and cost-control are vital. But when it comes to paying your team, cutting corners by using an app like Venmo instead of true payroll software can introduce serious risks. 

Below we explore why relying on Venmo for payroll or business payments isn’t just a convenience gamble — it can undermine your security, compliance, professionalism, and bottom line – and how your payroll can steer clear from these common risks.

Security: Are you really covered?

Apps like Venmo advertise ease of use and convenience, but for business and payroll use, the security picture is more complicated.

On one hand, Venmo provides standard protections: multi-factor authentication, encryption, etc. But as noted by security analysts, “services such as Venmo don’t offer the same protections as traditional bank accounts or business-grade payment processors.” 

For payroll, this matters because your employee and contractor payment data is sensitive. You want a platform that:

• Is explicitly designed for business payments, with controls around who can view/pay and audit trails.
  
• Can handle regulatory compliance issues (tax forms, withholding, multi-state payments) rather than being an ad-hoc transfer app.
  
• Gives you clarity on liability in case of fraud, chargebacks, or unauthorized access.
  

Using a peer-to-peer (P2P) app like Venmo for business payments blurs those lines. Fraud, account takeovers, or disputes can impact your cash flow and your company’s trustworthiness.

Payroll risks when using Venmo

If you use Venmo (or a similar P2P payment service) to pay employees or contractors, you face a handful of key risks:

1. Misclassification & compliance burden

Payroll isn’t simply “send someone money.” It includes calculating taxable wages, withholding appropriate taxes, issuing W-2s/1099s, managing multistate rates, and filing payroll tax returns. Small business owners can spend 3-10 hours monthly on manual payroll tasks and risk mistakes. If you treat a payment as a quick Venmo transfer rather than through payroll software, you may miss deductions, mis-classify workers (e.g., employee vs contractor), or fail to timely file or deposit taxes — all of which can expose you to fines or unhappy employees.

2. Timing, tracking, and audit trail issues

A proper payroll system gives pay stubs, access to tax forms, self-service portals for employees, and an audit trail you can pull up at year-end. In contrast, Venmo lacks many of these features, making it harder to demonstrate compliance or reconstruct payment history if questions arise.

3. Cash flow and funding issues

If you rely on Venmo for payroll, you may not have the guarantees or operational support that a payroll platform offers — e.g., the ability to schedule direct deposit runs, handle state tax payments automatically, or handle payment reversals accurately. The risk is that one payment hiccup can cause more stress for you and your staff.

Why you shouldn’t use Venmo for business

Beyond payroll-specific concerns, there are broader reasons Venmo is not built for business operations:

• Violation of service terms: Using a personal Venmo account for business purposes can breach Venmo’s User Agreement. The platform states you may not use it to “receive business, commercial, or merchant transactions” unless you use a properly authorized business profile. If Venmo detects unauthorized business activity, it could freeze your funds, reverse transactions, or limit access.
  
• Limited professionalism: Using Venmo may send a casual signal to clients, contractors or employees, which may undercut your business credibility. Businesses using Venmo may appear less legitimate.
  
• Inadequate business tools: Venmo lacks many business features such as automated invoice generation, full reporting, integrated accounting, sales tax management, and scalable workflows.
  
• Unclear protections and liability: When you use a service not purpose-built for business, you may end up bearing more risk — and less clarity around who holds it.

Transaction fees

Venmo business payments carry fees that can erode margins, especially when used at scale.

• Using Venmo’s “goods and services” tag for business payments incurs 1.9% + $0.10 per transaction for sellers.
• If the payment is made via credit card, the fee rises (e.g., 3.49% + $0.49) in some cases.
• Instant transfer options incur additional cost. 
• For small payments, that fee may not seem large. But for payroll/contractor payments across many people, it adds up — and since Venmo is not optimized for payroll, you may pay interest or costs from manual corrections or transfers.

By contrast, a payroll software like Thryv’s Workforce Center is designed with transparent pricing and fewer surprise charges for things like tax filings or state regulation compliance. 

Limited “fire-protection” 

One big misconception is that using Venmo for business payments gives you the same buyer/seller protections you might have with dedicated merchant services. That’s not the case.

• Venmo’s Purchase Protection is only available for eligible “goods and services” payments sent through correct flows — and even then, the coverage is narrower than traditional merchant protections.
  
• Venmo states that it may not provide any buyer/seller protection for “non-approved” business payments.

“Venmo does not offer a buyer or seller protection program for transactions conducted using the Venmo app or Venmo.com, regardless of the nature of the payment.” 

• In the event of fraud, chargeback, or dispute, you may be left without recourse, which is especially risky for payroll, vendor payments, or contractor payments, where you need reliable transaction certainty.

Essentially, if you treat business payments like informal transfers, you lose many of the formal protections that exist in payroll/merchant processing systems.

Enter: Thryv Workforce Center — the smarter payroll solution

When you compare the risks of using Venmo for business/payroll against a platform purpose-built for the job, the choice becomes clear. Here are some of the features the Thryv Workforce Center (WFC) offers that you simply won’t get from a P2P payment app.