Most businesses will agree that managing payroll can be an extremely complex and time-consuming process.
But what if you could seamlessly integrate payroll into your existing accounting workflows? Xero Payroll offers just that - with the ability to fully automate payroll tasks while syncing essential data across platforms.
In this post, we'll provide a comprehensive review of Xero Payroll, including its key features like tax calculation, payment processing, and reporting. We'll also dive into specifics around its integration with Xero Accounting, pricing options, implementation, and available support resources.
Introduction to Xero Payroll
Xero Payroll is an add-on service to Xero's popular cloud-based accounting software that allows businesses to manage payroll directly within Xero. It eliminates the need for separate payroll software by seamlessly integrating payroll functionalities into the core Xero platform.
What is Xero Payroll?
Xero Payroll is an automated payroll management system designed specifically for use with Xero accounting software. It handles all aspects of payroll, from calculating wages and tax obligations to paying employees and filing payroll taxes. Key features include:
- Automated payroll runs
- Easy employee setup
- Integrated with Xero accounting
- Pay employees by direct deposit
- File payroll taxes
- Robust reporting
By managing payroll in Xero, all payroll transactions automatically flow into the general ledger and other accounting modules for unified financial reporting.
Key Features
Some of the main features and capabilities of Xero Payroll include:
- Payroll automation - Automatically calculate paychecks based on hours tracked in Xero Projects or manually entered payroll details. Supports various pay types like salary, hourly, overtime, bonuses, reimbursements, etc.
- Tax calculations - Computes federal, state, and local payroll taxes. Allows tax payments to be automatically withdrawn from a bank account.
- Payroll reporting - Built-in reports for pay stubs, taxes, wages, workers comp, 401k, and more. Export reports to PDF or Excel.
- Employee self service - Employees can view pay stubs, manage tax info, change personal details and more via web and mobile app.
- Integration - Seamless connectivity with Xero accounting modules like contacts, projects, and reporting.
Integration with Xero Accounting
A major benefit of Xero Payroll is its tight integration with Xero's cloud accounting platform. Key features of the integration include:
- Automatic posting of payroll journals into the general ledger
- Bank account debits for net pay and tax liabilities
- Updates employee details from payroll to accounting
- Unified reporting across payroll and accounting
- Single sign-on access between Xero Payroll and Accounting
This deep integration eliminates manual processes and duplicate data entry across payroll and accounting. It provides complete visibility into payroll and its impact on the business's overall financial position.
Benefits of Using Xero Payroll
Seamless Data Flow
Integrating Xero Payroll with your accounting software enables automatic transfer of payroll data into the general ledger. This eliminates the need for manual entry of payroll transactions, ensuring payroll data flows directly into your financial reports without duplication of effort. Key benefits include:
- Automatic transfer of gross wages, taxes, deductions etc. from payroll to accounting after each pay run
- Reduction in payroll errors caused by manual data entry
- Up-to-date financial reporting that reflects true labor costs
Time Savings
By automating the flow of payroll data into your accounting software, Xero Payroll saves significant time compared to running payroll manually. Benefits such as:
- Streamlined payroll processing without manual accounting adjustments
- Elimination of time-consuming data reconciliation tasks
- More time focused on core business activities rather than administrative work
According to Xero, small businesses save an average of 3-5 days per year by using their integrated payroll solution.
Minimized Errors
Integration eliminates the need to enter payroll data twice - first in payroll software and then again in accounting. This prevents common errors including:
- Data entry mistakes from duplicate data entry
- Mismatched payroll and accounting figures
- Reporting inconsistencies and discrepancies
By maintaining one single source of truth across systems, businesses can generate accurate financial statements as well as comply with payroll tax obligations.
Key Payroll Features
Payment Processing
Xero Payroll offers convenient payment processing features to streamline payroll. Key highlights include:
- Direct deposit - Employees can have their net pay automatically deposited into their bank account(s). This saves the hassle of manually issuing paper checks.
- Multiple accounts - Employees can split their payroll deposit across multiple bank accounts if desired. Useful for those saving for multiple goals.
- Early access - Employees can access their earned wages early through integrated financial wellness features. This helps improve financial stability.
- Global payments - Xero Payroll can pay employees all over the world in multiple currencies. This enables seamless global payroll.
Tax Calculations
Xero automates complex payroll tax calculations for accuracy and compliance:
- Federal taxes - Automatically calculates federal income tax withholdings using the latest IRS tables. Supports additional federal taxes like Social Security and Medicare.
- State taxes - Computes state income tax withholdings based on employee residence and reciprocity agreements between states.
- Local taxes - Factors in local payroll taxes like city/county income taxes where applicable.
- Supplemental taxes - Handles supplemental federal income tax withholding rates. Useful for bonus payments.
- Multi-state payrolls - Easily manages tax calculations across multiple states in a single payroll.
Reporting
Robust reporting provides insights into payroll:
- Payroll registers - Transactional records of payroll payments, deductions, withholdings, etc. Useful audit trail.
- Wage and tax reports - Summarizes total pay and taxes withheld for a pay period or custom date range. Aids tax compliance.
- Labor cost reports - Breaks down gross payroll expenses by employee, role, department, or location. Enables cost analysis.
- Overtime reports - Tracks overtime hours worked and wages paid. Helps identify staffing gaps.
- Leave accruals - Monitors employee vacation/sick time earned, used, and balances. Manages liability.
Integration Details
Xero Payroll seamlessly integrates with Xero accounting software to enable efficient payroll and accounting workflows. This integration provides several key benefits:
Connected Data Flow
The Xero Payroll and Xero accounting integration enables automatic flow of payroll data into the accounting software. This includes:
- Employee payroll payments automatically recorded as expenses in the general ledger
- Payroll liabilities like taxes withheld automatically recorded as liabilities
- Eliminates need for duplicate data entry between payroll and accounting systems
By centralizing payroll and accounting data flows, businesses can streamline workflows and reduce administrative tasks.
Shared Reporting
With the Xero integration, businesses can access unified payroll and accounting reports within Xero accounting. This consolidates details into single reports like:
- Payroll costs shown by department or location
- Labor costs as percentage of revenue
- Taxes paid and liabilities owed
Consolidated reports give greater visibility into the link between payroll spending and overall financial health.
Single Sign-On
The Xero Payroll integration allows single sign-on access to both Xero Payroll and Xero Accounting with one user login. This enables simplified access without needing to manage multiple logins.
Single sign-on centralizes access to both systems for authorized payroll staff and accounting teams. This makes accessing and managing data seamless across both platforms.
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Pricing Options
Xero Payroll offers three pricing tiers to meet the needs of different businesses:
Starter
The Starter plan is ideal for small businesses with up to 5 employees. Key features include:
- Payroll for up to 5 employees
- Unlimited pay runs
- Direct deposit
- Tax calculations and filings
- Mobile access
This plan allows small businesses to automate payroll tasks and ensure tax compliance at an affordable price point.
Standard
The Standard pricing tier suits the needs of most small to medium-sized businesses. It includes all Starter features plus:
- Payroll for up to 20 employees
- Timesheets
- Leave management
- Reporting
With the Standard plan, businesses can streamline more HR processes beyond just payroll. The additional features help managers track time off, monitor labor costs, and generate insightful reports.
Premium
For larger companies with over 20 employees, the Premium plan unlocks more advanced capabilities like:
- Payroll for unlimited employees
- Advanced reporting with custom fields
- Automated tax payments
- API access
- Premium support
The Premium tier removes employee limits and adds customization options for companies that need to scale their payroll. The improved support and API access provides peace of mind for more complex payroll needs.
Implementation Process
Integrating Xero Payroll into your existing systems can streamline operations and unlock valuable insights. Here is an overview of the key steps involved:
Data Migration
Migrating your payroll information into Xero can be straightforward with some planning:
- Export payroll data from your current system. Common formats like CSV usually work smoothly.
- Review the Xero Payroll import templates to ensure your data maps correctly.
- Use the Xero Payroll Assistant to import the data. This checks for errors and guides you through any fixes.
- Confirm everything imported correctly by cross-checking reports.
System Configuration
Tailor Xero Payroll to fit your workflows:
- Set up custom payroll categories for earnings, deductions, reimbursements etc.
- Configure payment schedules for different employee groups.
- Automate reminders for upcoming deadlines.
- Customize permissions so employees only see relevant data.
Employee Onboarding
Bringing new hires into Xero Payroll is easy:
- Create an employee record with key details like salary, tax allowances etc.
- Upload documents like tax forms and bank details.
- Send onboarding emails with login info and first steps.
- Show employees how to access their pay history and manage tax documents.
With some planning, you can have new hires up and running quickly in Xero Payroll. Reach out for specialist support if needed during setup.
Support Options
Xero Payroll offers several support options to help customers with any issues they encounter. These include:
Knowledge Base
Xero Payroll has an extensive searchable knowledge base with helpful articles and resources on a wide range of topics. Customers can access step-by-step instructions, troubleshooting guides, FAQs, and more to resolve common issues on their own. The knowledge base is regularly updated.
Community Forums
Customers can connect with other Xero Payroll users in the community forums. Here they can search for existing discussions or start a new thread to ask questions and get advice from peers. While not an official support channel, the forums provide a helpful way to tap into the wisdom of other customers.
Direct Support
For more urgent or complex issues, Xero Payroll offers different tiers of direct email, chat, and phone support:
- Basic Support - Included for all customers at no extra charge. Response time is 1 business day. Helpful for general "how to" questions.
- Priority Support - Available as a paid add-on. Response time is 4 hours. Recommended for time-sensitive payroll issues.
- Premium Support - Top-tier paid support add-on. Response time is 1 hour with dedicated account manager. Ideal for mission-critical payroll needs.
The level of expertise and response times scale up accordingly based on the customer's specific requirements and budget. But all tiers provide helpful guidance from Xero Payroll's knowledgeable support staff.
Conclusion and Recommendation
Top Advantages
Xero Payroll provides several key benefits for businesses looking to streamline payroll and accounting:
- Seamless integration: Xero Payroll connects directly with Xero accounting software for automatic journal entries and reconciliation. This saves significant time by removing manual data entry.
- Accuracy: By integrating payroll and accounting, businesses can ensure accuracy and reduce human error from duplicate data entry.
- Automation: Rules can be set up for automatic calculations of taxes, deductions, leave accruals, and more based on pay rates and locations. This removes repetitive manual calculations.
- Reporting: Robust payroll reports on pay runs, leave, taxes, and more can be generated with a click. These can be exported to share with stakeholders.
- Accessibility: Xero offers user-friendly payroll software accessible from any device. Employees can access their own payroll information via a self-service portal.
Ideal User Scenarios
Xero Payroll is ideal for:
- Small businesses running Xero accounting software looking to add integrated payroll.
- Companies with employees in multiple locations who need to handle different tax calculations.
- Startups wanting cloud-based payroll software that can scale with business growth.
- Businesses seeking automated leave accruals, superannuation, and other calculations.
Final Thoughts
For any business running Xero accounting software, Xero Payroll is the obvious solution for integrated payroll management. The seamless connectivity saves significant time on manual processes while ensuring accuracy. For growing companies needing scalable solutions with automation and advanced reporting, Xero Payroll is a recommended option to consider.
