Payroll on Xero
Pay run
Xero's pay run feature is a simple payroll tool you can use to pay a few employees in your base currency, as well as running pay reports and managing basic employee information.
How it works
1. Set up your access as a payroll admin, then add employees and pay items such as ordinary pay and tax.
2. Process your pay run including the employees and hours they have worked, plus any tax calculations you've made and extra payments such as bonuses you may wish to include.
3. Send out payslips and pay your employees individually or as a batch payment.
4. (Optional) Run reports to review your pay runs or update your employee contact information.
Get Payroll Admin access
When adding a pay run for the first time. Xero prompts you to become a payroll administrator when you first add a pay run
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Adding or editing a Standard or Adviser user role. Under Settings, select Users and select the Payroll Admin checkbox to turn on payroll options for your employees so they can manage your payroll. You also need to select the Manage Users checkbox to change settings.
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If you clear the Payroll Admin checkbox for a specific employee, they can view some pay totals in reports or Accounts Payable (if their role allows it) but they can't access employee contact information or pay run details.
If you clear the Payroll Admin checkbox for all users, existing pay run information is kept but no user in the organisation can view them.
Set up pay items (for Xero's Pay Run feature)
Set up pay items in Xero so they are ready for you to add them to your employee profiles and use them when you are processing a pay run.
1. In the Accounts menu, select Pay Run.
2. Click Manage Pay Items.
3. Click New Pay Item.
4. Enter a unique pay item Name (such as Travel Allowance or Time and a half).
5. (Optional) Enter a Description.
6. Select a Pay/Tax Type and secondary fields when they apply.
7. (Optional) Select the Show as default pay item for all employees checkbox to apply this pay item as the default for all employees.
Note: For any pay items that won’t be physically paid, or offset against another account, you can enable payments in your chart of accounts to reconcile any outstanding liability.
8. Select Save.
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Add employee contacts (for Xero's Pay Run feature)
Add employee contact information such as personal, employment and bank account details for use in Xero's pay run.
1. Add employees and their full details outside a pay run
In the Contacts menu, select Payrun Employees.
Click Add Employee.
Enter the employee's personal details, following these guidelines:
-> Enter a name that is unique to each employee.
-> Enter an email address that can be used to receive payslips from Xero.
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(Optional) Enter the employee's Financial Details.
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Note: The Employee Tax Number and Ordinary Rate fields are not required. Xero uses the Payment Details when you pay your employees using a batch payment in Xero.
Click Save.
2. Add employee contacts during a pay run
If you haven't added all employees you want to pay in a pay period, you can add their basic details while you are processing a pay run.
In the Accounts menu, select Pay Run.
Select an existing pay run or create a new pay run.
Click Add Employee.
Enter a First Name and Last Name unique to that employee.
Click Add.
(Optional) Click Edit Employee.
-> Update employee detail fields such as Employee Tax Number and Ordinary Rate.
-> Click Save.
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Click into the Qty and Rate fields to update the existing pay items for that employee or click Add a new line. This only updates their payment details for this pay run.
Click Save.