Xero Payroll: A winner or a dud?

One of the things that originally held me back from trying out Xero for my own business was the lack of payroll features. (Sure, there are add-on partners that provide payroll features and synchronise with Xero, but I was reluctant to sign up for two lots of monthly fees.)

So I was pretty happy to hear about  the addition of payroll features to the standard Aussie version of Xero. And keen to put these new payroll features through their paces. Which I did today (in a sleepy, Saturday-afternoon-kind-of-way).

My first comment is that Xero’s Australian payroll is designed as a simple tool. When compared against fully-fledged payroll software, it’s kind of like riding a pushbike to work instead of driving a BMW . . . you still get there, but the pushbike requires more effort.

Having said this, there are some things that Xero’s payroll does just fine:

  • Allows you to record all the essential details of an employee’s pay, including gross wages, tax deducted, any leave taken, superannuation due and employee deductions
  • Organises and memorises pay runs for employees so you can easily repeat pay transactions for employees who receive the same money each week
  • Keeps track of PAYG tax and super, creating bills in your payables so you can see how much tax and super you owe
  • Allows you to record holiday or personal leave, so you can see how much leave you paid to any employee
  • Enables you to set up deductions for things like child support, union fees or whatever

And there’s a few things that Xero’s payroll DOESN’T even pretend to do . . .

  • Xero doesn’t calculate and deduct PAYG tax automatically. (This means that in order to figure out how much tax to deduct from an employee’s pay, you need to look up tax tables online at the ATO website or refer to printed tax tables. Which gets fiddly if an employee’s wage varies from one week to the next.)
  • Superannuation doesn’t calculate automatically either. (Yeah, I know it’s not hard to multiply wages by 9%, but newbies to this employment game are likely to forget the nuances of super, such as the fact you don’t pay any super at all if an employee earns less than $450 in any given month. Some additional detail in the online help alerting employers to this rule probably wouldn’t go astray.)
  • Xero doesn’t calculate leave entitlements. Although you can record holiday pay and see how much holiday pay you’ve paid to an employee so far, you can’t use Xero to calculate how much leave an employee is due.
  • You can’t print payment summaries when June 30 rolls around.

I reckon that Xero are being pretty fair when they say ‘If you have a smaller business and need a simple payroll tool for paying a few employees in your base currency, you can use the pay run function in Xero.’

I agree with this position. So long as you appreciate the limitations of Xero’s payroll, and you only have a couple of employees, the payroll features that Xero offers will do just fine. Sure, the payroll features seem undeniably primitive, especially if you’re used to using a ‘real’ payroll package, but recording pay transactions using Xero is still much better than recording pays using a spreadsheet or worse still, a handwritten wages book.

I’d be interested to know what YOU think about this subject. After all, a blog is meant to be a TWO-WAY conversation . . .  (and a two-way conversation is a good thing, I like to remind my nearest-and-dearest, when I’m prattling away to him last thing at night.)

I’d love to hear your thoughts about Xero’s payroll. So . . . click the Comment hyperlink below and type away  . . .


About veechicurtis

a one-woman geekspeak to plain-english converter
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8 Responses to Xero Payroll: A winner or a dud?

  1. Hi Veechi – I would pretty much agree with what you said about the Xero payroll – it is the payroll solution you have when you don’t have a payroll solution. Xero bills it as a product for small businesses with 1-4 employees which I would agree with. So yes, it is good it you don’t have casual staff or staff with overtime as you would need to check the PAYG each time, but it is very limited. I published a blog on Xero a couple of weeks ago http://bit.ly/dYexws

  2. Shaun Clough says:

    I’m inclined to go to SAASU but not sure if it has the same issues as Zero for payroll?

    • veechicurtis says:

      I’m not sure either Shaun — I haven’t started on my Saasu review yet. Maybe there’s something from Saasu reading this blog who could comment?

      • Had a brief look at Saasu Payroll this afternoon – looks reasonable. It does do tax calculations and has all the different scales including HELP. You can email payslips, it does calculate leave entitlements although I didn’t get this working. It also calculates 9% super, handles RESC and prints Payment summaries

  3. Adil says:

    https://www.turbopaye.com is yet another payroll service in the cloud.

  4. Andrea Mead says:

    I have been looking to change to a cloud accounting package for some time and came across Xero which seemed fabulous for everything – apart from Payroll. I have decided not to change from MYOB for this reason and even though I only have 10 employees, the additional time taken to process pays, which are not standard each payday, is too daunting.

  5. Hi Veechi,

    You are probably aware that Xero has now acquired Paycycle (http://blog.xero.com/2011/07/xero-acquires-australian-online-payroll-provider/), an online payroll service. Apparently they have listened to to their customers and decided to integrate Paycycle with Xero rather than further developing their own payroll. Sounds like a good plan!

    • veechicurtis says:

      Hi Anne

      Yes, I’ve been overseas for a few weeks so slightly out of touch and just catching up now. I’m glad that Xero has acquired Paycycle — payroll is such a specialised area of expertise that it makes total sense to build on existing knowledge and experience rather than reinventing the wheel. I’m looking forward to having a stronger set of payroll features available for clients.

      Thanks for your post!


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