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In truth you should not get involved at all.
Your friend does not work for you and you have not mentioned any connection to the ex employer that would require them paying your S corporation.
What you are being asked to do is "funnel" the money to your friend so neither the employer nor your friend would have to deal with tax being withheld.
It would still be taxable to your friend. Even if you agreed to do this and accept the payment then pass it along as a payment to your friend that does not avoid tax for anyone but the employer.
Your friend would have to pay all the FICA tax if they claimed this was a payment from your S corp to them as a non employee.
Do not get involved with their scheme to defraud (sadly that is what this would be even if your friend does not realize it).
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