Top 4 Xero payroll tips

By Andrew McVinish ■ 31/01/2025

Laptop with Xero payroll on screen

If you’re a tradie business owner, you can make your administrative life way easier by using all of the payroll features in Xero. Without a doubt, the #1 perk is all the time you’ll save, but you’ll also keep more cash in the bank and make fewer errors too.

Even better, these features are quick to implement. You just need to know what they do and where to find them. Here are our top Xero tips for payroll (as well as the financial and administrative perks for each one).

1. You can manage and track leave balances accurately and easily

Managing leave balances can be a tedious task, especially when you're juggling multiple employees and leave types. In Xero, you can easily track annual, personal, and long-service leave accruals, ensuring you stay compliant with governmental regulations.

Through the Employee Portal (see tip #2) you'll have it all in one place, updated in real-time and, most importantly, it will be accurate.

The financial perks

  • If employees “bank” a lot of annual leave, you might need to pay out a large sum if and when their employment ends. With accurate tracking, you’ll ensure they’re using leave throughout the year, so you won’t be caught with a hefty sum when they leave
  • Tracking means you only pay what you're obligated to. It avoids making errors and overpaying for unused leave
  • Xero can provide an audit trail too, preventing unnecessary financial liabilities while ensuring accurate legal compliance

The business perks

  • You can optimise your scheduling and maintain productivity levels without incurring additional labour costs
  • If too many employees take leave at the same time, you won’t be able to deliver your service. Additionally, you might be obligated to let employees take holidays over busy periods. Proper tracking avoids time clashes like this!

Where to find this feature

  1. Login to Xero
  2. Go to payroll settings (click on the "Payroll" tab in the main menu)
  3. Click the “Pay items” tab and then select leave
  4. Explore the leave options. You can explore various options related to managing employee leave including setting up leave types, defining accrual rules, and viewing employee leave balances
  5. Manage leave. You can add new leave types, adjust accrual rates, and review leave balances for individual employees

2. You can empower your team and make them accountable with the Employee Portal

Granting access to the Employee Portal means your team can view payslips, submit leave requests, view remaining leave, edit personal information, and download important documents. It gives them greater autonomy over their own records and instils a level of transparency within your business. Even better, it shifts the burden of inputting or downloading data on them, not you!

The administrative perks

  • You don’t need to create leave requests or provide pay slips anymore! Using this feature frees up time for you or any HR staff, meaning you can focus on other things besides arduous routine tasks
  • It reduces time spent answering questions your team can find out for themselves!

The financial perks

  • It encourages a sense of ownership and autonomy with your employees. It’s transparent and professional, can improve morale, and reduce employee turnover.

Where to find this feature

  1. Login to Xero
  2. Go to the "Payroll" tab located in the main menu
  3. Select Employees
  4. Click the employee’s name to open their details
  5. In the Details tab, under the contact information, review and update the employee’s email address.
  6. Invite Employees (if necessary). Click on the "Invite" button within the Xero Me section

3. You’ll save loads of time and avoid errors by using pay templates

Xero’s customisable templates streamline the pay run process by pre-filling recurring earnings, reimbursements, and deductions. Whether your employees work standard hours or have variable pay rates, using pay templates simplifies your payroll workflow and minimises the risk of mistakes.

Administrative perks

  • Utilising pay templates in Xero reduces the time spent on manual data entry and calculation errors
  • It allows you to focus on revenue-generating activities rather than repetitive administrative tasks

Financial perks

  • By automating pay runs with accurate pay templates, you’ll greatly reduce the chances of payroll mistakes that could result in costly fines or disgruntled employees
  • It also safeguards your financial resources and maintains employee satisfaction

Where to find this feature

  1. Log in to Xero
  2. Go to the "Payroll" tab located in the main menu
  3. Select Employees
  4. Click the employee’s name to open their details
  5. Select the “Pay Template” tab
  6. Customise templates. You can create new templates or edit existing ones. You can tailor them to include recurring earnings, reimbursements, or deductions for your employees
  7. Save changes. After customising, be sure to save your changes!

4. The automatic superannuation feature is super helpful

If you have a team, you’ll likely know your employees can choose their superannuation provider. This means, as their employer, you might need to make several different payments each quarter (at a minimum). Additionally, contributions must be received by a strict due date. If the funds are late, the contributions won’t be tax-deductible. You’ll also need to pay interest and an administrative penalty. Ultimately, superannuation is a headache and can be costly if mistakes are made.

Administrative perks

  • If you use Xero’s automatic superannuation, it’s just one direct debit for all your superannuation contributions
  • Managing superannuation this way simplifies compliance with regulatory requirements, reducing the risk of costly audits or investigations
  • Again, it’s a time-saver!

Financial perks

  • The feature requires you to “tick off” the payments per pay period. This prevents double-paying superannuation contributions!
  • You’ll avoid fines, interest charges and administrative penalties
  • You’ll always be tax efficient because you’re much more likely to make the deadline

Where to find this feature

  1. Log in to Xero
  2. Go to the "Payroll" tab located in the main menu
  3. Select Superannuation
  4. Set up automatic superannuation, (if required). Click Get Started
  5. Check your organisation’s ABN and Legal/Trading Name are correct, then click Next
  6. Select an authoriser and enter their mobile number, then click Next
  7. Select a bank account to make direct debit payments for super, then click Next
  8. Review and agree to the terms and conditions, then click Register
  9. Xero will contact the authoriser once automatic superannuation has been set up

If you’re using Xero, the payroll features are a game-changer

Running a tradie business comes with its fair share of moving parts. You have multiple projects, budgets, employees, assets, deadlines, and more. It’s intense (we think more so than the average business) and it can feel hectic at times.

By implementing these Xero features, you're going to streamline and quieten those moving parts substantially. You’ll save time, reduce errors and empower your team to take ownership of their own life-admin.

Supporting tradie businesses is our thing!

Now, if you’re looking for something more than what Xero can offer – if you need regular strategic and hands-on expert help - go on and give us a shout. We’ll work out what “help” looks like for you, see if we’re a good fit, and go from there!

By the way… We also wrote the 7 best tips for Xero blog, which covers more genius features on the platform. Check it out for more time-and-cash-saving features.