Before running payroll for your business using Xero, you need to set it up properly. In this article, we will look at everything you need to do on the Organisation tab in the payroll settings area.
Organisation Tab in Xero’s Payroll Settings
To get to the Organisation tab in the payroll settings area:
- Go to Settings → Payroll Settings from the main drop-down menu on the upper left-hand side of your screen.
- You should now be in the right place. If not, click on the Organisation tab.
To ensure your general ledger is correct when processing your pay runs, you need to set up the right accounts for Xero to post your payroll journal entries to:
- Bank Account: this should be the bank account from which you will pay salaries and wages. If you do not have a bank account set up in Xero, you must do so before completing this step.
- PAYG Liability Account: this is a balance sheet account that keeps aside Pay As You Go Withholding tax processed in your pay runs until you pay it to the government from your bank account. Account 825: PAYG Withholdings Payable is often used here.
- Wages Expense Account: this is a profit and loss account that shows the salary and wage expenses processed in your pay runs. Account 477: Wages and Salaries is often used here.
- Wages Payable Account: this is a balance sheet account that keeps aside salary and wage payments processed in your pay runs until you pay them from your bank account. Account 804: Wages Payable – Payroll is often used here.
- Superannuation Liability Account: this is a balance sheet account that keeps aside superannuation payments processed in your pay runs until you pay them from your bank account. Account 826: Superannuation Payable is often used here.
- Superannuation Expense Account: this is a profit and loss account that shows the superannuation expenses processed in your pay runs. Account 478: Superannuation is often used here.
If you want to segment your payroll in order to track groups of employees, you can do so with one or both of the optional payroll tracking settings. The two ways you can track your employees are by:
- Employee Groups
- Timesheet Categories
In order to do this, you first need to set up tracking categories. In Xero’s demo company, we can see from the drop-down boxes that a Region tracking category has been set up. By selecting this option, you will be able to run payroll reports in Xero that are segmented by region.
These two tick boxes allow you to select whether you would like to show certain details on your employees’ payslips:
- Annual Salary: this will only be displayed for full-time and part-time staff.
- Employment Basis: whether full-time, part-time, casual or any other basis.
Tick the boxes if you want to show those details on your employee’s pay slips.
If you would like to show your business’ logo on your employees’ payslips, you can upload it here. This is optional – you do not have to upload a logo if you do not want to. If you do want to upload your logo you can use a .jpg or .png file under 1MB. For a perfect fit, size your image to 529px wide by 139px high. If you upload an image of any other size Xero will resize it accordingly.
Once you have completed the settings on the Organisation tab, press Save at the bottom of your screen.