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 deductionsOrganises and memorises pay runs for employees so you can easily repeat pay transactions for employees who receive the same money each weekKeeps track of PAYG tax and super, creating bills in your payables so you can see how much tax and super you oweAllows you to record holiday or personal leave, so you can see how much leave you paid to any employeeEnables 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  . . .