We're a headhunter agency that connects US businesses with elite LATAM professionals who integrate seamlessly as remote team members — aligned to US time zones, cutting overhead by 70%.
We’ll match you with Latin American superstars who work your hours. Quality talent, no time zone troubles. Starting at $9/hour.
Start Hiring For FreeSetting up payroll can be an incredibly complex and tedious process, especially when doing it for the first time.
Luckily, Xero offers a user-friendly payroll system that makes the process straightforward. In this post, you'll learn a comprehensive, step-by-step approach to setting up payroll in Xero.
We'll cover everything from initial setup like customizing pay templates, to configuring tax rates, managing superannuation funds, creating pay schedules, processing payments, and more. You'll have all the information you need to get payroll up and running smoothly in Xero.
Xero provides a user-friendly, cloud-based payroll system that can help businesses streamline payroll management. Setting up payroll properly in Xero is important for ensuring compliance and accurate payments.
Xero's online payroll software offers several advantages, including:
By handling payroll tasks digitally through Xero, businesses can save time and reduce the chance of errors.
To begin using Xero payroll, businesses need to configure some initial settings under Payroll Settings. This includes:
Taking the time to customize these settings helps ensure payroll processes run smoothly.
An accurate payroll setup is critical for remaining compliant and keeping employees satisfied with on-time, correct payments. Key elements businesses need to setup properly include:
With some time invested upfront in setup, Xero payroll can save businesses effort while also improving compliance and transparency.
Setting up payroll in Xero is straightforward with their user-friendly interface. Here are the key steps:
Following these steps will have Xero payroll running smoothly. Monitor the dashboard for any STP errors needing attention. Adjust Xero payroll settings as your organization grows. Consider setting up timesheet categories for faster processing.
Xero makes managing payroll easy, allowing you to focus on running your business. Their user-friendly interface and cloud-based access streamlines the entire online payroll process.
To create a payroll activity summary in Xero, follow these steps:
In the Accounting menu, select Reports.
Find and open the Payroll Activity Summary report. This report provides an overview of payroll expenses and liabilities over a specified period.
Select the date range to generate the report for. You can choose a custom date range or a preset period like last month.
For Employees, select all employees, an individual employee, or an employee group to include.
Payroll reports in Xero use the payment date of each pay run, not the pay period ending date. Keep this in mind when selecting your date range.
Click Update to generate the payroll activity summary.
The report includes totals for gross pay, tax, deductions, net pay, and liabilities over the period. Review the totals to check if payroll calculations are accurate.
You can export the summary as a PDF or CSV file for record keeping. Xero also archives past reports which you can access anytime.
Let me know if you need any help customizing or interpreting your payroll activity summaries!
Yes, Xero offers a Payroll-only plan designed for businesses with 4 or fewer employees. This streamlined plan includes key payroll features such as:
The Payroll-only plan provides an affordable way for small businesses to leverage Xero's user-friendly payroll software without needing to subscribe to a full Xero accounting software plan.
With the Payroll-only option, you can:
While this plan doesn't include accounting software access or advanced payroll functionality, it's a cost-effective solution for startups and microbusinesses that want to automate payroll processes for a small team.
Key things to note with Xero Payroll-only:
So if you're running payroll for up to 4 people, this paired-down Xero plan lets you leverage quality payroll software without overspending. The Payroll-only option delivers essential features at an affordable price point for early-stage ventures.
Xero offers a built-in payroll system as part of its cloud-based accounting software. This allows businesses to manage payroll completely within Xero without needing an additional system.
Some key things to know about Xero's payroll system:
So in summary, Xero does provide a built-in payroll system as part of its cloud accounting platform. This can save businesses time and money by avoiding the need for a separate payroll system. The Xero payroll functionality handles everything from timesheets to payments to tax filings.
To add a new employee in Xero, navigate to the Employees tab and click "Add employee". You will then need to fill out details in the Employment tab and Taxes tab.
In the Employment tab, provide the employee's personal details, job title, pay schedule, bank account, tax file number, and employment start date. Make sure all relevant details are accurately entered.
In the Taxes tab, select the appropriate tax scale based on the employee's tax residency status. Input their tax file declaration and deduction details.
Once all information is entered, save the employee profile. You will then be able to generate payslips and include them in your payroll batches going forward.
The Pay Template section in Xero allows you to customize wage rates and payroll calculations for each employee.
To access an employee's Pay Template, go to the Employees tab, select the relevant employee, open the Payroll section on the left sidebar, and click "Pay Template".
Here you can add multiple pay categories, such as regular wages, allowances, overtime, commissions etc. Input the pay rates, units, and categories as needed. You can also add pre-tax and post-tax deductions.
The Pay Template will automatically calculate total earnings, deductions, taxes, and net pay based on your inputs. You can preview payslips to confirm accuracy.
Be sure to regularly review and update Pay Templates as needed when employment terms or tax requirements change.
The Employee Notes section allows you to record extra details, attachments, tasks, and reminders related to each employee.
This is useful for tracking performance reviews, employment contract amendments, training certificates, disciplinary notices, and any other employee-related communications.
To access it, select the desired employee from the Employees tab, open the Payroll section in the left sidebar, and click "Employee Notes".
You can add multiple note categories, upload files, set reminders for upcoming tasks and events, and log a timeline of all employee interactions and documents.
This centralized hub keeps all key employee details neatly organized in Xero for easy reference and management.
Setting up tax rates and thresholds accurately in Xero is crucial for ensuring payroll tax compliance. Here are the key steps:
Recheck tax rates in Xero whenever tax laws change or at the start of a new fiscal year. Keeping tax calculations current avoids issues or penalties.
Managing super obligations for staff is a key payroll duty. Follow these recommendations when setting up super in Xero:
It's important to keep super funds and employee contribution rules up to date in Xero. This ensures accurate payments and compliance. Monitoring this area regularly is advised.
Setting up accurate pay schedules and efficiently processing payroll in Xero can streamline operations and ensure compliance. This involves:
To get started, navigate to the Payroll settings and define your pay periods, such as weekly or monthly. Specify the payment date for each period.
You can create pay templates with default settings like pay rates and super contributions. Assign the templates to new employees to quickly set them up.
Revisit the pay schedule periodically and make any needed adjustments, such as for public holidays.
When it's time to run payroll, confirm all timesheets are entered and approved. Process any leave requests.
Go through the Payroll Summary page and review all details before filing. Address any errors or warnings, such as STP errors.
Submit payroll and confirm the batch payment details. Payments will process on the due date.
Monitor employee payroll accounts periodically. Make any corrections or adjustments in a timely manner by processing pay reversals or additional payments.
Maintaining accurate schedules and carefully executing payroll can ensure staff are paid correctly and on time while remaining compliant. Let Xero handle the complex tasks so you can focus on operations.
To add a bank account in Xero for payroll purposes, follow these steps:
Once connected, Xero will withdraw two small deposits to validate the account. Log back into Xero within 1-2 days to enter those amounts and complete verification.
Adding bank details enables efficient payroll transactions like:
To run payroll in Xero, follow this general process:
On the selected Pay Date, the batch will automatically process all:
This enables efficient, automated payment distribution each pay run. Monitor batch status under Bank Accounts > Batch Payments.
Xero offers several useful features to enhance payroll management beyond basic salary payments. These additional capabilities help streamline administrative tasks and provide greater visibility into employee data.
The Attach Documents tool allows you to upload files directly to an employee's profile in Xero payroll. This keeps all their essential paperwork organized in one central location.
To get started, open the employee's details and select the Employment tab. Next to Attach Documents, click Add to upload files from your computer. Supported file types include PDF, JPEG, PNG and DOC/DOCX.
Once a document is uploaded, it will appear in the employee's Attach Documents section with the filename, date added and file size. You can add multiple files for each employee as needed over time.
Key benefits of using Attach Documents include:
Overall, the document attachment feature simplifies payroll compliance and keeps sensitive employee information secure.
For businesses that bill employees' time to clients, Xero offers Timesheet Categories for precise hour tracking. This helps allocate billable time across projects.
To configure Timesheet Categories:
Now when employees log hours in Xero, they can assign times to the appropriate categories.
For example, a marketing agency might create separate categories for Content Writing, Graphic Design, Client Meetings, etc. This allows precise time allocation for billing.
Key benefits include:
With Timesheet Categories, businesses gain greater insight into how employee hours are spent. This enhances payroll accuracy while supporting client accounting needs.
Setting up payroll in Xero requires careful attention to detail across several key steps:
Following best practices around data entry, configuration, reporting, and validation is critical for accurate, compliant payroll in Xero.
While the initial setup lays the payroll foundation, ongoing maintenance is crucial:
Keeping payroll data current through regular system reviews and updates ensures smooth payroll processing, happy employees, and continued legal compliance.
See how we can help you find a perfect match in only 20 days. Interviewing candidates is free!
Book a CallYou can secure high-quality South American for around $9,000 USD per year. Interviewing candidates is completely free ofcharge.
You can secure high-quality South American talent in just 20 days and for around $9,000 USD per year.
Start Hiring For Free