Xero Payroll Settings – How to Add an Earnings Pay Item

by | Apr 18, 2018

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Before paying your employees through Xero payroll, you need to set up some pay items. In this tutorial, we will set up an Earnings pay item in Xero’s demo company.

Pay Items in Xero’s Payroll Settings

To add a pay item, first go to the Pay Items tab of the payroll settings area:

  1. Go to Settings → Payroll in the main menu.
  2. Click on the Pay Items tab.

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How to Add an Earnings Pay Item

On the Pay Items tab you should see a number of pay items that have already been set up in the demo company. In the exercise, we will add a new Overtime Earnings pay item. To do this:

  • Select Earnings on the left-hand side.
  • Click on the Add button on the right-hand side.
  • Click on Overtime Earnings in the drop-down list.

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A pop-up box will appear for you to enter the details of your new overtime earnings pay item. For this exercise, we will keep it simple and not fill in every detail. If you are creating pay items for your business instead of the demo company, please ensure you complete the various fields and options in line with government regulations.

To finish creating the pay item for this tutorial, complete the fields in the pop-up box as follows:

  • Earnings Name: type in Saturday Overtime.
  • Display Name (optional): leave it blank.
  • Rate Type: choose Multiple of employee’s ordinary earnings rate from the list.
  • Multiple (ex. 1.5): type in 1.5.
  • Expense Account: select 477: Wages & Salaries from the list.
  • Tick Boxes: leave them un-ticked.

Click on the Add button when finished. You should now see Saturday Overtime in the list of Earnings pay items.

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Mark Cunningham

Mark Cunningham

Xero Specialist | Udemy Instructor | Small Business Owner

I have been a company accountant for more than 20 years. I am now dedicated to empowering small business owners through my highly-rated and popular Udemy courses on Xero, bookkeeping and accounting.

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